Essays on health insurance
Uninsured individuals receive fewer health care services for at least three reasons: higher prices, responsibility for the entire bill, and potential provider reductions for concern of non-payment. This study isolates differences in service levels between insured and uninsured individuals that are attributed to different effective prices; the uninsured pay the bill without a contribution from an insurance company. I capitalize on Maryland's highly regulated health care system, where prices are set by the state, are uniform across all patients, and hospitals are compensated for free care and bad debt, to isolate the difference in quantity demanded by the uninsured. While the Oregon study compares Medicaid individuals and their low-income uninsured counterparts, this paper considers income variation among the uninsured, quantifies the difference in demand in an environment with uniform prices, and evaluates health outcomes in light of these reductions. A Blinder-Oaxaca decomposition estimates uninsured individuals receive 8.4% fewer services after accounting for differences in characteristics. Compared to insured patients, the uninsured are 74% as likely to be readmitted. This difference in service level and readmission rates is larger for patients residing in low-income zip codes and smaller in wealthy zip codes. This suggests that income is a substantial constraint for uninsured patients, and as this constraint relaxes, more services are demanded. For illnesses with a high risk of mortality, both services demanded and readmission rates are not statistically different for insured and uninsured individuals. Mortality rates are similar for insured and uninsured individuals living in the bottom 75\% of average income by zip code. Differences in the top 25% seem to be attributable to small numbers of uninsured individuals. While this paper analyses Maryland, it provides insight into demand for insured individuals with high-deductible plans country wide. Prior to meeting their deductible, these insured patients face similar conditions to uninsured patients in Maryland — they have access to negotiated rates but are solely paying the bill. Hospital Insurance bargaining: In addition to risk-sharing, U.S. health insurance companies negotiate rates for services with hospitals. The price of service can vary depending on which entity, if any, is insuring the patient. Insurers (and possibly their customers) benefit from negotiating through lower prices, while hospitals benefit through higher patient volume. Using Massachusetts' Center for Health Information and Analysis (CHIA) data, we use hospital and insurer characteristics to estimate negotiated prices specific to hospital-insurer pairs. We investigate the relationship between two important quantities: (i) the charged amount that hospitals bill for their services, and (ii) the amount that hospitals are paid for insured patients. These numbers differ because the former is a function only of the services provided and the hospital's ''chargemaster'' prices, while the latter is the result of negotiation. We find that payments for privately insured patients are on average 38\% of charges when payments are made on a fee-for-service basis. However this ratio varies greatly by hospital and insurer. Compared to community hospitals without an emergency room, academic medical centers are compensated 15% more for their services, and hospitals with an emergency room are compensated 7% more than those without.
Martin, Purdue University.
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