اندازه گیری رفاه «اثرات افست» در بیمه سلامت

Changing health insurance coverage for one service may affect use of other insured services. When improving coverage for one service reduces use of another, the savings are referred to as “offset effects.” For example, costs of better coverage for prescription drugs may be partly “offset” by reductions in hospital costs. Offset effects have welfare implications but it has not been clear how to value these impacts in design of health insurance. We show that plan-paid – rather than total – spending is the right welfare measure of the offset effect, and go on to develop a “sufficient statistic” for evaluating the welfare effects of change in coverage in the presence of multiple goods. We derive a simple rule for when a coverage improvement increases welfare due to offset effects.

Health insurance coverage for one good or service can affect the quantity demanded of other goods or services in a health plan. Following an improvement in coverage for one good, a reduction in the quantity demanded of other services or goods is referred to as an offset effect. A large empirical literature in health economics and health services research, focusing on coverage for drugs, finds offset effects, and measures these effects by the change in total spending on the other covered goods. For example, Shang and Goldman (2007) use Medicare Current Beneficiary Survey (MCBS) data from 1992 to 2000 to show that the extra spending on drugs induced by medigap coverage is more than offset by reductions in total health care spending on other services. Hsu et al. (2006) compare medical spending for Medicare beneficiaries with a cap on drug coverage to spending by those without a cap at Kaiser Permanente of Northern California prior to Medicare Part D. Drug spending was 28% less in the capped group but other categories of expenditures were higher and total spending for all care was not significantly different between the groups, implying a near dollar-for-dollar offset in total costs. Gaynor et al. (2007) study the effect of increases in copayments charged for drugs among private employees on total (plan plus consumer) spending. Increases in non-drug spending, largely in outpatient care, offset $.35 of each dollar saved in drug costs.1Chandra et al. (2010) found that the savings in costs due to higher copayments for drugs were partly offset by higher spending on hospital services among retired state employees in California. They tracked offsets by payer since a primary (Medicare) and secondary (employer-provided supplemental) shared in offsets unequally. The implicit logic in offset papers is that if total medical costs fall due to an increase in coverage, then the change in coverage is welfare improving (i.e. “pays for itself”). This paper argues that change in total medical spending, meaning the sum of plan and patient out-of-pocket spending, is not the right measure of the economic value (or cost) of a change in insurance coverage due to offset effects. Rather, health plan costs alone measure the economic value of savings due to reductions in the use of other services. Applying methods reviewed by Chetty (2009), we show that a “sufficient statistic” for evaluating the welfare effect of change in coverage for one good is the change in total plan-paid costs less the change in costs transferred to/from consumers.2 We go on to derive an elasticity rule for when the offset effects of an improvement in coverage increase welfare. A simple argument shows why total costs are not the right welfare measure of an offset effect. Suppose the plan covers just one service, “health care,” and an increase in coverage of health care increases a consumer's total expenditures on health care. The consumer budget constraint implies that spending on some other non-covered services has to fall. This “offset” says nothing about efficiency since coverage expansions are always exactly “offset” in this trivial sense. What if the affected other spending were on another form of health care that was minimally covered in the plan, say for one percent of costs with consumers paying ninety nine percent? Logically, token coverage cannot imply that we should count the full spending change as an offset. To see the intuition for our result about the role of plan-paid costs consider the following example. Suppose that there are two services and both are (partially) covered by insurance, namely the individual has to pay some copayment lower than the marginal cost of providing the services. What is the effect of a change in the level of copayment of one of the two services on welfare? Since the level of services the individual chooses to use is at the point where his marginal benefit equals the copayment, and since the copayment is less than marginal cost, there is a welfare loss associated with the consumption of the two services. The change in welfare loss is just the sum of the changes in consumption times the difference between marginal cost and marginal benefit for each of the two services. Note that the difference between marginal benefit and marginal cost is equal to the plan's share of costs. Our focus on plan-paid cost is due to this: plan paid costs are a measure of the welfare loss per unit, and total welfare effect of a change in the offset good's consumption is the change in quantity multiplied by the plan paid share of costs.

In applied policy research, offset effects played an important role in the discussion about the design of optimal health insurance for mental health treatment,8 and more recently the do so in the case of coverage for drugs.9 Most public and private plans cover drugs, but the coverage is partial in the sense that a drug formulary typically excludes many drugs, and for those drugs that are covered, the percent paid by the plan is much less than for other health care services. Interestingly, the copayment for generic drugs is often so high that it exceeds the acquisition cost to the health plan.10 Our ideas about valuing offset effects have the most current direct application to the question of coverage for drugs, where a considerable amount of research, noted above, has studied how more drug coverage affects other service use. An important feature of the market for branded drugs under patent protection is that the price health plans pay is much higher than the social marginal cost of production. Lakdawalla and Sood (2009) point out that by lowering the out-of-pocket price to patients, insurance coverage for branded drugs can move price towards rather than away from social marginal cost and improve the social efficiency of consumption. This is distinct from our analysis of the welfare effects of offsets where we benchmark welfare against the plan's acquisition cost. We note that the literature on optimal health insurance with multiple services is consistent with our interpretation offset effects. Goldman and Philipson (2007) regard offset effects as a cross-price elasticity and characterize efficient (second-best) demand-side cost sharing in health insurance. Added hospital costs offset savings from reducing coverage of drugs in their example. Characterizing their results, they conclude, “When hospital care is substitutable and excessive – i.e. provided below cost – there is an additional marginal cost of raising drug copays.” (p.430). This echoes our point: if hospital care were not partly plan-paid, resulting in it being “provided below cost,” and “excessive,” there would be no offset effect to count. The measure of inefficiency of excessive use is the divergence between marginal benefit and marginal cost—the marginal plan contribution.11 A natural question is to ask whether markets could succeed in setting coverage for various health care services to take account of cross-price effects. In a perfectly competitive market, a health plan would be forced to maximize welfare of the representative consumer, implying the efficiency issues discussed here would be taken care of in competitive equilibrium. Health insurance markets are fraught with market failure, however, making it worthwhile to have an explicit expression for the welfare effects of offsets. Health plan market power in pricing is probably not the main issue here. A monopolist would seek to provide a certain utility to enrollees at minimum cost, implying offsets would be taken into account within a benefit plan offered by a monopolist. More serious is adverse selection which leads to distorted plans in market equilibrium. And probably most important in the context of offset effects is the presence of multiple insurance plans. For example, most consumers with Medicare in the U.S. have coverage from multiple insurers, each with no reason to consider spillover effects on another plan. Finally, much of health insurance in the US and elsewhere is public insurance where plan design is not subject to a market test. In sum, there can be little assurance that market forces alone will lead to optimal coverage, leaving a role for explicit expressions for the value of offset effects in health insurance. The major limitation of our rule for offsets and model setup generally stems from the assumption that quantity is determined by the equality of marginal benefit to the consumer/patient and patient copayment. While the standard demand model is widely applied in theoretical and empirical health care research, it is also seriously questioned as a basis for describing the outcome of patient-provider interactions (Chandra et al., 2012). Effective physician agency on behalf of the patient would be consistent with our approach, but we acknowledge that the marginal benefit-marginal cost equality is still a strong assumption. Relatedly, health economists doubt whether consumer demand should be interpreted as marginal benefit when assessing the efficiency of changing coverage. Perspectives from “value-based insurance design” and behavioral economics both question the conventional welfare framework for assessing the efficiency cost of added coverage for a service.12 As Pauly and Blavin (2009) show, however, consumer over or undervaluation can be integrated with traditional considerations of optimal health insurance. One element of optimal design of health insurance is financial risk, absent from our welfare expressions above. Our purpose is to derive expressions for the welfare impacts of offset effects, so we have not directly considered gains/losses in terms of the associated risk spreading. Within a context where offset effects are of principal concern, since increases in costs of one service are counterbalanced by decreases in costs elsewhere, the overall effects on risk bearing are likely to be small.