To what extent do employers subsidize the difference in prices among the insurance plans they offer their employees?

When employers offer multiple health plans at little or no cost to employees, what incentive do the employees have to select a less expensive plan? Economists have long contended that employers subsidize inefficiency when they contribute more for higher-cost health insurance plans than for lower-cost plans. These economists contend that such subsidies remove pressure on health plans and providers to maximize efficiency.Missing from these arguments have been data documenting the experience of employers that subsidize and do not subsidize the price of higher-cost plans.

Using data on the employer-sponsored health benefits of large firms, we examine the practice of paying more for more-expensive health plans in the United States. We also contrast premium growth among employers that engage in this practice. Although our data are not definitive on the question of whether employers subsidize inefficiency when they contribute more to higher-cost plans, they do provide a useful first step in analyzing health plan subsidization at the employer level.

This paper first describes our data and the incentive ratio, a tool developed to measure the extent to which an employer subsidizes the difference in prices among its health plans. Using the incentive ratio, we evaluate the scope of employer subsidies for higher-cost plans in the United States, and we analyze changes in a firm's overall health care costs based on whether an employer pays more for more-expensive health plans. Finally, we discuss policy implications based on our findings and provide an outline for further research.

An emerging solution to health care market failures involves a mix of federal/state regulation and private purchaser initiatives.

Market forces play an essential role in the regulation of managed care, the service that combines health insurance and health care delivery. Markets have successfully reduced overall health care costs and maintained quality, but because of the special characteristics of the market for managed care, market forces alone fail to produce an efficient and equitable allocation of health care resources. Collective action is needed.

This paper outlines the roles of market forces and collective action in a high-quality and tolerably (if not optimally) efficient and equitable health care system. A blend of market forces and collective action, including government action, is necessary for a good outcome, although where possible and practical, private-sector collective action is preferable. Of course, there is a great deal of government action in health care, and this paper is not a call for more. Rather, it attempts to clarify the kinds of collective action that are needed to correct market failures.

Managed care is widely expected to affect physicians throughout the healthcare system. In this study, we examined the relationship between health maintenance organization (HMO) activity and the level of competition, autonomy and satisfaction of physicians who do not work for HMOs. We obtained data on physicians from the 1991 Survey of Young Physicians, which contains a nationally representative sample of physicians younger than age 45 who had 2 to 9 years of practice experience in 1991. We examined the relationships between HMO market share and perceived competition, autonomy, and satisfaction using multivariate logistic regression. The main outcome measures were perceived level of competition; several measures of physicians' freedom to undertake common tasks that might be treated by managed care (eg, hospitalizing patients, ordering tests and procedures); satisfaction with current practice situation; perceived ability to practice quality medicine; whether the physician would attend medical school again; and satisfaction with medicine as a career. We found that an increase of 10 percentage points in HMO market share was associated with a 28% increase in the probability that physicians will regard their practice situation as very competitive as opposed to somewhat or not competitive (P0.01). Examinations of the relationship between HMO market share and autonomy revealed few significant results. We found no evidence that increases in HMO activity adversely affect physician autonomy. Only a limited amount of evidence indicates that increases in HMO activity reduce the satisfaction of specialist physicians, and no evidence associates HMO activity with the satisfaction of generalists. Although physicians perceive HMOs as competitors, HMO activity has not had a strong negative effect on the autonomy and satisfaction of physicians.

Objective: To determine the hospital cost of caring for newborn infants with congenital syphilis.

Study Population: All live-born singleton neonates with birth weight greater than 500 gm at an inner-city municipal hospital in New York City in 1989.

Methods: We compared the characteristics of 114 infants with case-compatible congenital syphilis with those of 2906 infants without syphilis. Cost estimates were based on New York State newborn diagnosis-related groups (DRG) reimbursements adjusted for length of stay, birth weight, preterm delivery, and selected maternal risk factors, including infection with the human immunodeficiency virus, cocaine use during pregnancy, and history of injected drug use.

Results: For infants with congenital syphilis, the unadjusted mean cost ($11,031) and the median cost ($4961) were more than three times larger than those for infants without syphilis (p 0.01). After adjustment, congenital syphilis was associated with an additional length of hospitalization of 7 1/2 days and an additional cost of $4690 (both p 0.01) above mean study population values (7.13 days, $3473).

Conclusions: Based on the number of reported cases (1991 to 1994), the average annual national cost of treating infants with congenital syphilis is approximately $18.4 million (1995 dollars). This estimate provides a benchmark to assess the cost-effectiveness of strategies to prevent, diagnose, and treat the disease.

We investigate the effect of managed care on the health care system, focusing on the effects managed care could have on the number and types of health care providers and their efficiency. By influencing providers, managed care may change the structure and performance of the entire health care system in ways that influence care provided to all patients. We begin by discussing the mechanisms by which managed care influences health care providers, concentrating on shifts in market demand and increases in the amount of attention paid to price in provider choices. We develop a theoretical framework that illustrates these effects. We then empirically examine the relationship between managed care activity and mammography providers. We find evidence that increases in HMO activity are associated with changes in the number of providers, the volume of services produced by each provider, and the prices they charge. This evidence is consistent with the view that HMOs can have broad effects on health care providers.

We present four findings. First, physicians from states enacting liability reforms that directly reduce malpractice pressure experience lower growth over time in malpractice claims rates and in real malpractice insurance premiums. Second, physicians from reforming states report significant relative declines in the perceived impact of malpractice pressure on practice patterns. Third, individual physicians' personal experiences with the malpractice system are a key determinant of the perceived importance of defensive medicine: Physicians who have had a malpractice claim filed against them, particularly a recent claim, are more likely to report changes in practices as a result of malpractice pressure than physicians who have not. Fourth, the impact of individual physicians' claims experience on perceptions is smaller in reforming than in nonreforming states. Taken together, these results suggest that reforms in law affect physicians' attitudes, both by reducing the probability of an encounter with the liability system, and by changing the nature of the experience of being sued for those physicians who defend against malpractice claims. These results validate our previous research by illustrating how reforms change physician incentives. Our 1996 study showed that reforms changed physician behavior, but stopped short of investigating the mechanism by which reforms altered medical practices.57 Our current results, however, indicate that mechanisms commonly cited by physicians in anecdotal reports namely the frequency and severity of malpractice claims may play an important role in fostering defensive medical practices. Reforms appear to affect practices particularly through their impact on the attitudes of physicians who experience lawsuits. In this paper, we did not explicitly model why attitudes of physicians who are sued in states with reforms are less dramatically affected [*pg 106] than attitudes of physicians in states without reforms.58 However, the differences we find here suggest that malpractice claims are less onerous in states with reforms, providing a foundation for their differential impact on physician attitudes. In addition, our results suggest that physician surveys do relate to actual behavior. The fact that state-level reforms both reduce measures of malpractice pressure and reduce physician perceptions of the impact of malpractice pressure suggest that survey methods provide valid measures of defensive practices. Nonetheless, further investigation of the extent of the validity of survey methods will be a fruitful topic of further research. Because the format of the 1984 and 1993 questions regarding the impact of malpractice pressure on practice patterns were not comparable,59 we needed to assume that impact of the change in the questions' terms was uncorrelated with physicians' personal characteristics and uncorrelated with geographic area in order to identify the impact of law reforms on relative changes in the rates of reported malpractice-pressure-induced changes in behavior. Future research might investigate the validity of our assumption, or might seek to replicate our results with comparable survey questions. In addition, our results suggest that physician surveys do, in part, measure negative feelings about the malpractice system, or unobserved differences across physicians, rather than the targeted issue of the impact of malpractice pressure on perceptions and practice patterns. Malpractice claims history has a strong positive correlation with perceived changes in malpractice-pressure-induced changes in practices, and more recent history is more strongly correlated with perceived changes than is less recent history. Future research might investigate the extent to which these findings represent actual changes in practices, rather than the well-studied problem of response bias.

A population-based probability sample of elderly individuals (n = 426), who were originally studied between 1981 and 1986 (mean age at initial study was 72.5 years), were followed for mortality. Those with > or = 30 respiratory disturbances per hour of sleep had significantly shorter survival (p = 0.0034), but the respiratory disturbance index (RDI) was not an independent predictor of death. When Cox proportional hazards analysis was done, only age (the strongest predictor), cardiovascular disease and pulmonary disease were independent predictors of death. It may be that factors that are secondary to or associated with sleep-disordered breathing (SDB), such as cardiovascular or pulmonary disease, predispose these elderly to death.