Thomas G. McGuire

Optimal payment systems for health services

Demand-side cost sharing and the supply-side reimbursement system provide two separate instruments that can be used to influence the quantity of health services consumed. For risk-averse consumers, optimal payment systems--pairs of insurance and reimbursement plans--are characterized by conflict rather than consensus between patient and provider about the quantity of treatment. A model of conflict resolution based on bargaining theory is used to represent the outcome when the payment system creates divergences between desired demand and desired supply. Using that model, we describe the optimal combination of insurance and reimbursement systems that maximize consumer welfare.

A Randomized Trial of Treatment Options for Alcohol-Abusing Workers

BACKGROUND Employee-assistance programs sponsored by companies or labor unions identify workers who abuse alcohol and refer them for care, often to inpatient rehabilitation programs. Yet the effectiveness of inpatient treatment, as compared with a variety of less intensive alternatives, has repeatedly been called into question. In this study, anchored in the work site, we compared the effectiveness of mandatory in-hospital treatment with that of required attendance at the meetings of a self-help group and a choice of treatment options. METHODS We randomly assigned a series of 227 workers newly identified as abusing alcohol to one of three rehabilitation regimens: compulsory inpatient treatment, compulsory attendance at Alcoholics Anonymous (AA) meetings, and a choice of options. Inpatient backup was provided if needed. The groups were compared in terms of 12 job-performance variables and 12 measures of drinking and drug use during a two-year follow-up period. RESULTS All three groups improved, and no significant differences were found among the groups in job-related outcome variables. On seven measures of drinking and drug use, however, we found significant differences at several follow-up assessments. The hospital group fared best and that assigned to AA the least well; those allowed to choose a program had intermediate outcomes. Additional inpatient treatment was required significantly more often (P less than 0.0001) by the AA group (63 percent) and the choice group (38 percent) than by subjects assigned to initial treatment in the hospital (23 percent). The differences among the groups were especially pronounced for workers who had used cocaine within six months before study entry. The estimated costs of inpatient treatment for the AA and choice groups averaged only 10 percent less than the costs for the hospital group because of their higher rates of additional treatment. CONCLUSIONS Even for employed problem drinkers who are not abusing drugs and who have no serious medical problems, an initial referral to AA alone or a choice of programs, although less costly than inpatient care, involves more risk than compulsory inpatient treatment and should be accompanied by close monitoring for signs of incipient relapse.

New Evidence Regarding Racial And Ethnic Disparities In Mental Health: Policy Implications

Minorities have, in general, equal or better mental health than white Americans, yet they suffer from disparities in mental health care. This paper reviews the evidence for mental health and mental health care disparities, comparing them to patterns in health. Strategies for addressing disparities in health care, such as improving access to and quality of care, should also work to eliminate mental health care disparities. In addition, a diverse mental health workforce, as well as provider and patient education, are important to eliminating mental health care disparities.

Hospital response to prospective payment: Moral hazard, selection, and practice-style effects

In response to a change in reimbursement incentives, hospitals may change the intensity of services provided to a given set of patients, change the type (or severity) of patients they see, or change their market share. Each of these three responses, which we define as a moral hazard effect, a selection effect, and a practice-style effect, can influence average resource use in a population. We develop and implement a methodology for disentangling these effects using a panel data set of Medicaid psychiatric discharges in New Hampshire. We also find evidence for the form of quality competition hypothesized by Dranove (1987).

Economics and Mental Health

Abstract This paper is concerned with the economics of mental health. We argue that mental health economics is like health economics only more so: uncertainty and variation in treatments are greater; the assumption of patient self-interested behavior is more dubious; response to financial incentives such as insurance is exacerbated; the social consequences and external costs of illness are more formidable. We elaborate on these statements and consider their implications throughout the chapter. “Special characteristics” of mental illness and persons with mental illness are identified and related to observations on institutions paying for and providing mental health services. We show that adverse selection and moral hazard appear to hit mental health markets with special force. We discuss the emergence of new institutions within managed care that address longstanding problems in the sector. Finally, we trace the shifting role of government in this sector of the health economy.

Racial and ethnic disparities in detection and treatment of depression and anxiety among psychiatric and primary health care visits, 1995-2005.

Context:Recent evidence questions whether formerly documented disparities in care for common mental disorders among African Americans and Hispanics still remain. Also, whether disparities exist mainly in psychiatric settings or primary health care settings is unknown. Objective:To comprehensively examine time trends in outpatient diagnosis and treatment of depression and anxiety among ethnic groups in primary care and psychiatric settings. Design and Setting:Analyses of office-based outpatient visits from the National Ambulatory Medical Care Study from 1995–2005 (n = 96,075). Participants:Visits to office-based primary care physicians and psychiatrists in the United States. Main Outcome Measures:Diagnosed with depression or anxiety, received counseling or a referral for counseling, received an antidepressant prescription, and any counseling or antidepressant care. Results:In these analyses of 10-year trends in treatment of common mental disorders, disparities in counseling/referrals for counseling, antidepressant medications, and any care vastly improved or were eliminated over time in psychiatric visits. Continued disparities in diagnoses, counseling/referrals for counseling, antidepressant medication, and any care are found in primary care visits. Conclusions:Disparities in care for depression and anxiety among African Americans and Hispanics remain in primary care. Quality improvement efforts are needed to address cultural and linguistic barriers to care.

Statistical discrimination in health care

This paper considers the role of statistical discrimination as a potential explanation for racial and ethnic disparities in health care. The underlying problem is that a physician may have a harder time understanding a symptom report from minority patients. If so, even if there are no objective differences between Whites and minorities, and even if the physician has no discriminatory motives, minority patients will benefit less from treatment, and may rationally demand less care. After comparing these and other predictions to the published literature, we conclude that statistical discrimination is a potential source of racial/ethnic disparities, and worthy of research.

Gender and racial/ethnic differences in use of outpatient mental health and substance use services by depressed adults.

This study examines depressed adults’ use of mental health services, focusing on Latinos and African Americans. Self-report data for adults meeting CIDI criteria for major depression or dysthymia from the 1997–98 HealthCare for Communities Survey were analyzed. Gender stratified logistic regression models examined the relationship between race/ethnicity and outpatient mental health service use, controlling for sociodemographic, health status, insurance, and geographic characteristics. Latinas and African American women and men exhibited low use of outpatient mental health services. Similar results were observed in an insured subsample. Service use by minorities was more affected by financial and social barriers (e.g., stigma). No gender differences were observed in self-reported barriers to care. Concerted and continued efforts to promote access to mental health services are critical for minority men and women affected by depression; adults may have unmet mental health needs. Other vulnerable populations include older adults especially, men, and men in poor health.

Chapter 9 - Physician Agency*

This chapter reviews the theory and empirical literature on physician market power, behavior, and motives, referred to collectively as the issue of “physician agency.” The chapter is organized around an increasingly complex view of the demand conditions facing a physician, beginning with the most simple conception associated with demand and supply, and building through monopolistic competition models with complete information, and finally models with asymmetric information. Institutional features such as insurance, price regulation, managed care networks and noncontractible elements of quality of care are incorporated in turn. The review reveals three mechanisms physicians may use to influence quantity of care provided to patients: quantity setting of a nonretradable service, influencing demand by setting the level of a noncontractible input (“quality”), and, in an asymmetric-information context, taking an action to influence patient preferences. The third mechanism is known as “physician-induced demand.” The empirical literature on this topic is reviewed. Theories based on alternatives to profit-maximization as objectives of physicians are also reviewed, including ethics and concern for patients, and the “target-income” hypothesis. The target-income hypothesis can be rejected, although there is empirical support for non-profit maximizing behavior.

Payment levels and hospital response to prospective payment

Nearly ten years after the implementation of Medicares Prospective Payment System (PPS), some of its major impacts remain hard to explain using existing economic models. We develop a simple model of the hospitals choice of intensity of care, which affects demand for admissions. The model suggests an important role for the level of prospective payment, independent of the effect of marginal incentives. Predictions from the model are compared first with aggregate utilization data from Medicares PPS experience, and then with various hospital-level studies which control for interhospital differences in reimbursement rates.