Professional Documents
Culture Documents
Jonathan Gruber
Robin McKnight
We are extremely grateful to Dolores Mitchell, Ennio Manto, Catherine Moore, and Diane McKenzie
at the GIC for their enormous assistance in providing the data for this project and to seminar participants
at Brigham Young University, UC Irvine and NBER Summer Institute for helpful comments. This
research was supported by the National Institute on Aging through Grant #P30AG012810 to the National
Bureau of Economic Research. Jonathan Gruber is a member of the Commonwealth Health Connector
Board. The views expressed herein are those of the authors and do not necessarily reflect the views
of the National Bureau of Economic Research.
NBER working papers are circulated for discussion and comment purposes. They have not been peer-
reviewed or been subject to the review by the NBER Board of Directors that accompanies official
NBER publications.
2014 by Jonathan Gruber and Robin McKnight. All rights reserved. Short sections of text, not to
exceed two paragraphs, may be quoted without explicit permission provided that full credit, including
notice, is given to the source.
Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from
Massachusetts State Employees
Jonathan Gruber and Robin McKnight
NBER Working Paper No. 20462
September 2014
JEL No. I13
ABSTRACT
Recent years have seen enormous growth in limited network plans that restrict patient choice of provider,
particularly through state exchanges under the ACA. Opposition to such plans is based on concerns
that restrictions on provider choice will harm patient care. We explore this issue in the context of
the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major
financial incentive to choose limited network plans for one group of enrollees and not another. We
use a quasi-experimental analysis based on the universe of claims data over a three-year period for
GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited
network plans, with the states three month premium holiday for limited network plans leading 10%
of eligible employees to switch to such plans. We find that those who switched spent considerably
less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions
in quantity of services used and prices paid per service. But spending on primary care actually rose
for switchers; the reduction in spending came entirely from spending on specialists and on hospital
care, including emergency rooms. We find that distance traveled falls for primary care and rises for
tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients.
The basic results hold even for the sickest patients, suggesting that limited network plans are saving
money by directing care towards primary care and away from downstream spending. We find such
savings only for those whose primary care physicians are included in limited network plans, however,
suggesting that networks that are particularly restrictive on primary care access may fare less well
than those that impose only stronger downstream restrictions.
Jonathan Gruber
Department of Economics, E17-220
MIT
77 Massachusetts Avenue
Cambridge, MA 02139
and NBER
gruberj@mit.edu
Robin McKnight
Department of Economics
Wellesley College
106 Central Street
Wellesley, MA 02481
and NBER
rmcknigh@wellesley.edu
2
Asemployersandgovernmentslooktocontrolrunawayhealthcarecosts,oneplacetheyare
turningistolimitednetworkplans.Recognizingthatthecostofcomparableservicescanvarywidely
acrossproviders,insurersareofferingplansthatexcludethehighestcostprovidersandthereby
significantlyreduceinsurancepremiums.Theseplansoftendonotvaryintheirenrolleecostsharingor
otherplancharacteristics,relyingonlyontherestrictiontolowercostproviderstoensuresavings.Asa
result,theyhaveproventobeincreasinglypopular,andtheyappeartobeamainstayoftheplan
offeringsonstateandfederalexchangesundertheAffordableCareAct(ACA).Inparticular,theexplicit
tyingofACAinsurancesubsidiesforlowincomefamiliestothe(second)lowestcostplanintheareais
likelytoinduceenormousmovementintolimitednetworkplans,whichareoftentheleastexpensive.
Buttheselimitednetworkplansarenotwithouttheirdetractors.Manyareconcernedthat
individualswillsufferadisruptionincareiftheyswitchtoalimitednetworkplan.Thiscouldleadto
deteriorationinthequalityofcarewherethecontinuityofcareismostvaluable,suchasforthosewith
chronicillness.Recentexpansioninlimitedandtierednetworkplans(thelatterincludeabroader
networkbutchargedifferentialsforuseofmoreexpensiveproviders)inMassachusetts,forexample,
wasstronglyopposednotonlybyhighercostprovidersbutalsobypatientadvocacygroups.1Indeed,
thisconcernpromptedtyingtheACAsubsidiestothesecondlowestcostplaninanarea,toensurethat
patientswouldnotbeforcedintonetworkswhichdidnotincludetheirprovider.Despitethis,ACA
criticshaverecentlyfocusedonthedominanceoflimitednetworkplansonthenewexchanges.2
Assessingtheimplicationsforenrolleesoflimitednetworkplanenrollmentisthereforean
importantissueforevaluatingboththefutureofemployersponsoredinsurance(ESI)andtheefficacyof
theACAexchanges.Yetthereisvirtuallynoworkontheimplicationsofenrollmentinalimitednetwork
1
WeismanandConaboy(2011)
2
Forexample,theCEOofCedarsSinaiHospital,ThomasPriselac,recentlytoldTimemagazine,Werevery
concernedwiththeimpact[thatasmallernetwork]hasonpatients(Pickert2014).AnarticleonCNN.com
describedpatientswhoaredismayedthattheircurrentdoctorsarentintheplansorthattheycantgotothe
onestheythinkarebestforthem(Luhby(2014).Similarly,TheBostonGlobequotedpatientNancyPetro,who
saidNowIhavetodrive50milesforbloodworkwhentheresahospitalthreemilesfrommyhouse(Jan2014).
3
planforenrolleewellbeing.Thereisanolderandmuchlargerliteratureontheimpactsofmanaged
careplans,whichincludeasoneoftheirkeyaspectsnetworklimitations(e.g.Glied,2000).Butthis
literaturewasnotfocusedondistinguishingtheimpactsofnetworklimitationsfrommanyoftheother
differencesinvolvedinmanagingcare.Thereisalsoasmallrecentliteratureonhowlimitednetworks
impactchoiceofproviders(seeFranketal.forareview),butthisliteraturedoesnotaddressthe
impactsonoverallspendingandutilizationpatterns.
Toaddressthisissue,weturntotheexampleoftheMassachusettsGroupInsurance
Commission(GIC),thehealthinsuranceproviderforstateemployees,whichintroducedsizeablenew
incentivesforlimitednetworkplansaspartoftheiropenenrollmentforfiscalyear2012.Inparticular,
thestateofferedathreemonthpremiumholidayforenrollmentinlimitednetworkplansbystate
employees.Atthesametime,theGICprovidesinsuranceforanumberofmunicipalities,towhomthis
premiumholidaywasnotextended,providinganaturalcontrolgroup.WehaveobtainedfromtheGIC
acompletesetofclaimsdataforthe2009through2012periodwhichallowustoassesstheimplications
ofthissizeablenewincentiveforenrollmentinlimitednetworkplans.
Weusethesedatatoanswertwosetsofquestionsaboutlimitednetworkplans.First,how
responsiveareindividualstofinancialincentivestousesuchplans?Wehavesizablevariationin
financialincentivesinourdata,withthesavingsfromchoosingalimitednetworkplanrisingbyover
$500peryearonaverage.Thisallowsustoobtainprojectionsforpricesensitivitythatarehighly
relevanttoemployerplansandexchanges.Wecanalsoassesswhichenrolleesaremostpricesensitive.
Dofinancialincentivesinduceonlyhealthyenrolleestojoinlimitednetworkplans,leadingtoincreasing
sortingbyhealthacrossinsurers?
Wethenestimatetheimplicationsoflimitednetworkenrollmentforhealthcareutilization,
spendingandoutcomes,forthoseenrolleeswhododecidetoswitch.Weareparticularlyinterestedin
4
assessingtheextenttowhichsuchswitcherschangetheirpatternofphysicianutilization,andwhether
thisimpactsbroaderhealthcareutilization.
Ourfindingssuggestthatswitchingtoalimitednetworkplanisverysensitivetofinancial
incentives;thethreemonthpremiumholidayofferedbytheGICcaused10%ofenrolleestoswitchto
limitednetworkplans,withanimpliedelasticityofswitchingwithrespecttothepremiumsavingsof1.3.
Thehealthiestindividualsarethelikeliesttoswitch,althoughthedifferencesbyhealtharenotlarge.
Wefindthatincentivestoswitchtoalimitednetworkplaninducedasizeablereductionin
spendingfortheGICof4.2%,implyingthatthemarginalpersoninducedtoswitchplansbythisincentive
spent36%less.Spendingfallssignificantlyformostcategoriesofspendingandthespendingdecline
appearstobecausedbyreductioninboththequantitiesofcarereceivedandthepricespaidforcare.
Mostimportantly,however,thereisanincreaseinprimarycarephysicianvisitsandspendingthatis
morethanoffsetbyadecreaseinspecialistvisitsandspending.Fallsinemergencyroomandhospital
spendingsuggestthatanyreductioninphysicianaccessthroughnetworklimitationsdidnotcausean
increaseinuseoftertiarycare,andthereisnoevidenceofanydeteriorationalongmeasuresofhospital
quality.Distancetraveledtoprovidersfallsforprimarycarephysicians,butrisesforspecialistsandin
particularhospitals;thereis,however,noevidencethatpatientsareusinglowerqualityhospitals.There
isalsonoevidenceofparticularlyharmfuleffectsforchronicallyillpatients.Butwedofindthatthe
savingsareconcentratedinthoseindividualswhocanretaintheirprimarycarephysicianwhenmoving
toalimitednetworkplan,suggestingthatlimitsonprimarycareaccessmaynotbeascostreducingas
aredownstreamlimitsonotherproviders.Overall,thefindingssuggestthattheswitchtolimited
networkplansreducedspendingwithoutharmingaccesstoprimarycareorinducingshiftstomore
expensivetertiarycare.
Ourpaperproceedsasfollows.SectionIdescribestheGICpolicychange.SectionIIlaysoutthe
detaileddatamadeavailabletousbytheGIC,andSectionIIIdescribesourempiricalstrategyforusing
5
theserichdatatoidentifytheimpactoflimitednetworkplans.SectionIVshowstheresultsforplan
choice,andSectionVpresentstheresultsforutilizationresponses.SectionVIconsidersimpactson
patientaccessasmeasuredbydistancetraveledandhospitalquality,whileSectionVIIconsiders
heterogeneityinourfindings.SectionVIIIconcludes.
PartI:TheGICPolicyChange
TheGICprovideshealthinsuranceoptionsforallstateemployeesaswellasemployeesofa
numberoflocalmunicipalitieswhohavechosentobuyintothestateplan.Atthestartofoursample
period,theGICinsured81,420stateemployeesand109,343dependents.Inaddition,therewere23
municipalitiespurchasingtheirinsurancethroughtheGIC,with14,232employeesand19,160
dependents.MunicipalitiesmayfindthebroadernegotiatingpoweroftheGICamoreattractive
alternativetotheirlocalpurchasingoptions,althoughunionsoftenopposethehigheremployee
contributionsandmorelimitedchoicesassociatedwithGICenrollment.Asaresultoftheseconflicting
interests,about10%ofthemunicipalitiesinthestatewereenrolledintheGICby2012.
Infiscalyear2011,theyearbeforethelimitednetworkincentiveplanbegan,theGICoffered11
planoptions.TheseplanoptionsaresummarizedinTable1.Oftheseplans,fivewereclassifiedas
broadnetworkplans(mostlyPreferredProviderOrganizations(PPOs))thatallowedemployeesafree
choiceofproviderinthecountiesinwhichtheplansoperated.Theothersixwerecategorizedas
narrownetworkplanswithmorelimitedchoiceofproviders..Thecostsharingfeaturesofthebroad
networkandlimitednetworkplansarenearlyidentical,sotheonlysubstantivedifferenceacrossthe
plansistheirnetwork.3AccordingtoinformationfromGICinsurers,thesenarrownetworkplansare
3
Thereareminimaldifferencesincostsharingacrossplans;mostofthevariationisacrossinsurers,notacross
plantypes.Forinstance,Tuftsplanshaveslightlyhigherhospitalcopaymentsthanotherplans,butthesehigher
copaymentsapplytoboththeirbroadnetworkplan(TuftsNavigator)andtheirlimitednetworkplan(TuftsSpirit).
Asaresult,averagehospitalcopaymentsinlimitednetworkplansareidenticaltoaveragehospitalcopaymentsin
broadnetworkplans.Foraspecialist(inTier1),copaysrangefrom$20to$25,withanaverageof$24.17in
6
establishedtoexcludethemostexpensiveproviderswhilestillmaintainingsufficientcoverageofthe
plansservicearea.
Ofcourse,narrownetworkisavaguetermthatcanhavemultiplemeanings.Toprovidea
richerinterpretationofthemeaningofanarrownetworkintheGICcontext,weconsiderempirical
measuresofnetworkbreadth.Inparticular,wetakeourfullsetofdataoverthreeyears(described
furtherbelow)andfocusoncountiesinwhichplansoperate.Inthosecounties,weconsiderall
providersforwhichweobserveatleast5(or10)innetworkclaimsoverthethreeyearperiodacrossall
insurers.Wethencalculate,foreachinsuranceplan,theproportionoftheseprovidersforwhichwe
observeatleast5(or10)innetworkclaimsforthatparticularplan.Whilethismeasureundoubtedly
incorporatesmeasurementerror,itnonethelessprovidessomerelativeinformationaboutthebreadth
ofeachplansnetworkwithinthecountiesinwhichitoperates.
TheresultsofthisexercisearepresentedinTable2.Theysuggestthatlimitednetworkplans,
onaverage,haveclaimsfromasmallerfractionofthephysiciansandhospitalsinacountythanthe
broadnetworkplansdo.Overall,ourmeasuressuggestthatbroadnetworkplanscovernearlytwiceas
manyphysiciansandabout50%morehospitalsthanarecoveredbynarrownetworkplans.Whileone
ofthelimitednetworkplans,HealthNewEngland,appearstohavearelativelybroadhospitalnetwork,
itisworthnotingthatthisplandoesnotoperateineasternMassachusetts,soitsnetworkdoesexclude
manyhospitalsinthestate.4
limitednetworkplansand$23.00inbroadnetworkplans.Forprimarycarephysicians,copaymentsrangefrom
$15to$20,withanaverageof$17.50inlimitednetworkplansand$18.00inbroadnetworkplans.
4
WehaveconfirmedtheresultsinTable2byusingdatafrominsurerswhereavailable.Wehavecomparedthe
listsofinnetworkhospitalsforlimitednetworkplansandfoundthattheresultsaresimilartothosethatwereport
inTable2.Forexample,HealthNewEnglandincludes92.3%ofhospitalsintheclaimsbasedmeasureand100%of
thehospitalsinthelistbasedmeasure.Likewise,TuftsSpiritincludes32.9%ofhospitalsintheclaimsbased
measureand25.7%inthelistbasedmeasure.Forphysicians,weentereddataonallinnetworkphysiciansfor
twolimitednetworkplans,HarvardPrimaryChoiceandHealthNewEngland.Forbothplans,wefoundthatfor
25%ofphysicianswedidnothaveenoughclaimstoclassifytheminourclaimsdata;fortheremaining75%of
physicians,60%(Harvard)or68%(HealthNewEngland)wereclassifiedaslimitedinbothourdataandtheinsurers
lists,aneffectivematchrateof8090%.
7
Priortothepremiumholiday,therewasanexistingfinancialbenefittochoosinglimited
networkplans,reflectingdirectlythelowercostofthoseplanstothestate.Inparticular,thestate
contributed20%ofthecostofinsuranceplansforactiveemployeeshiredbeforeJuly1st,2003(and25%
forthosehiredafterthatdate),sothataportionofthelowercostsoflimitednetworkplanswere
passedontoemployees.In2011,theemployeeshareofthemonthlypremiumforindividualcoverage
rangedfrom$81.32forUnicareCommunitytoChoiceto$153.36forUnicareBasic(forworkerspaying
20%ofthepremiumcost).Sixteenpercentofenrolleesatthestatelevelchosetoenrollinlimited
networkplans.
Thefinancialincentivetoswitchtoalimitednetworkplanvariedsignificantlyacrossemployees,
forseveralreasons.First,thereweredifferentcontributionrulesforthelocalmunicipalities.For
example,whileSaugusrequiredthatemployeescontributeonly10%towardsmostplans,Swampscott
requiredthatemployeescontribute35%towardsmostplans.Second,withinmunicipalities,different
contributionrulesapplytodifferenttypesofemployees.Forinstance,teachersfacedifferentratesthan
otheremployeesinsomemunicipalities.Third,thestatechargesdifferentratestoemployeeswith
differenthiringdates,asdescribedabove.Finally,somemunicipalitiesprovidedmoregenerous
coverageoflowercostinsuranceoptions.Forexample,Springfieldrequiredthatemployeescontribute
25%towardsUnicareBasic,butonly15%towardsotherplans.Thesedifferencesincontributionrules
generatemeaningfuldifferencesintheincentivetoswitchtoalimitednetworkplan.Forexample,the
savingsfromswitchingfromfamilycoveragethroughTuftsNavigator(abroadnetworkplan)tofamily
coveragethroughTuftsSpirit(alimitednetworkplan)rangedfrom$29permonthinthethree
municipalitiesthatrequireda10%employeecontributionforbothplans,to$160permonthina
municipalitythatrequireda7%higheremployeecontributionforTuftsNavigatorthanforTuftsSpirit.
8
Forthefiscalyear2012openenrollment,theGICdecidedtoaddanextraincentiveforstate
employeestoenrollinlimitednetworkplans.5Inparticular,stateemployeeswhodecidedtoenrollin
limitednetworkplanswereofferedathreemonthpremiumholiday,withnoemployeecontribution
requiredforthefirstthreemonthsoftheyear.Fortheaffectedplans,thispremiumholidayamounted
toa25%reductionincontributions,rangingfromsavingsof$268permonthforindividualcoverage
fromUnicareCommunityChoiceto$764forfamilycoveragefromHarvardPilgrimPrimaryChoice.This
incentivewasnotofferedbylocalitieswhichusetheGICsystem.Thispolicychangeinducedamajor
differentialincentiveforlimitednetworkplansforstateversusmunicipalemployees.
PartII:Data
OurdataforthisanalysisincludeacompletesetofclaimsandenrollmentrecordsforallGIC
enrolleesforthethreefiscalyears,spanningtheperiodfromJuly2009throughJune2012.GICs
insurancecontractsrunfromJulythroughJune,sothesedataallowustoobservethreefiscalyears.The
premiumholidayaffectsfiscalyear2012,whichrunsfromJuly2011toJune2012.
Forthepurposesofouranalysis,welimitthesampletoactiveemployeesandtheirdependents
whowerecontinuouslyenrolledoverthethreeyearsofoursampleperiod.Therestrictionto
continuouslyenrolledindividualsensuresthatthecompositionofoursampledoesnotchangeover
time.However,thissamplerestrictionprecludestheinclusionofeightmunicipalitiesthatjoinedGIC
duringoursampleperiod.Becausewecannotidentifywhichemployeesareteachers,weexcludedata
fromamunicipalitythathasdifferentcontributionratesforteachersthanforotheremployees.The
resultingsampleincludesdataon159,732enrollees,ofwhom86%obtainedcoveragethroughthestate
and14%obtainedcoveragethroughoneof21municipalitiesinoursample.
5
AtthesametimethestateimposedmandatoryreenrollmentinGICplans,withanautomaticdefaulttolimited
networkplansifindividualsdidntreenroll.Butreenrollmentrateswereover99%,sothisdidntenduphavinga
verylargeimpact.(CommonwealthofMassachusettsGroupInsuranceCommission,2012)
9
Our(deidentified)dataincludeverylimiteddemographicinformationsuchasageandgender,
informationonenrollmentchoices,andinformationonhealthcareutilizationandspendingoverthis
timeperiod.Intheclaimsdata,weidentifydifferenttypesofservicesandconstructannualmeasuresof
utilization.Ourmeasuresincludecountsofmedicalencountersinayear(e.g.officevisits,prescription
drugpurchases,etc.)andtotalexpendituresbyallpayersforthosemedicalservices.Whileitispossible
thatoutofnetworkproviderschoosenottofileclaimswiththelimitednetworkinsurers,wedo
observeclaimsthatindicatethattheproviderisoutofnetwork,includingsomeclaimsforwhichthe
insurerpaysnothing.Whilewecantruleoutthepossibilitythatwearemissingsomeclaimsfromout
ofnetworkproviders,anymissingclaimsarelikelytobeforlowcosteventsandwouldthereforehave
minimaleffectonouroverallfindings.Withthreeyearsofclaimsdataforeachenrollee,ourfinaldata
setincludes479,196annualobservationsonthe159,732continuouslyenrolledindividualsinour
sample.
Table3providessummarystatisticsonoursample,includinginformationonaverageannual
medicalexpendituresandutilization.Theaveragememberincurs$4,811intotalmedicalexpenses
duringayear.About23%oftheseexpensesareincurredinofficevisits,18%ininpatient
hospitalizations,and30%inoutpatientvisits.Prescriptiondrugsaccountfor19%ofthecosts.The
remainderofthecostsincludesemergencydepartmentvisits,labs,andothercosts,whichinclude
homehealthcare,supplies,ambulances,andavarietyofotherservices.
PartIII:EmpiricalStrategy
FollowingthediscussionoftheGICpolicychangeabove,thereareseveralsourcesofvariationin
thecostoflimitedandbroadnetworkplans.Atanypointintime,thereissignificantvariationacross
statevs.municipalworkers,aswellasacrossstateworkersbydateofhire.Overtime,aspremiums
change,thesedifferencesinpolicygiverisetodifferentialchangesintheoutofpocketpremiumcostof
10
limitednetworkplans.Andthepremiumholidayinfiscalyear2012createdasharpdiscontinuityinthe
costoflimitednetworkplansforstateemployeesrelativetolocalemployees.
Asaresult,wepursuetwoidentificationstrategiesinouranalysis.Thefirstisadifferencein
differencesanalysisaroundthe2012policychange,comparingstatetomunicipalemployeesovertime.
Thisisalegitimateidentificationstrategyiftherearenopreexistingdifferentialtrendsbetweenthese
twogroups,andifthereisnocontemporaneousshocktooneofthesetwogroups.
Tocarryoutthisstrategy,weestimateregressionsoftheform:
whereiindexesindividuals,mindexesmunicipalities(andstate),andtindexesyears.STATEisadummy
forobtainingcoveragethroughastateemployee,andAFTERisadummyforfiscalyear2012.MUNI
representsafullsetoffixedeffectsformunicipality,andYEARrepresentsafullsetofyearfixedeffects.
Xisasetofindividualcontrolswhichincludesage,gender,familycoveragetier(individualorfamily),
andanindicatorforstateemployeeswhowerehiredbeforeJuly1st,2003.Thecoefficientcaptures
theimpactofbenefittingfromthepremiumholiday,relativetoearlierstateworkers,andcomparedto
thechangeoverthesametimeperiodformunicipalworkers.
Thesecondidentificationstrategyincorporatesthebroaderpricevariationthatarisesfromthe
differentialoutofpocketpremiumcostoflimitednetworkplansacrossemployeetypesandovertime.
Theadvantageofusingthisapproachisthatitprovidesmorepowertoidentifytheeffectofincentives
tomovetoalimitednetworkplan.Thedisadvantageisthattherecouldbepotentialendogeneityfrom
severalsourcesinthisbroadervariation.Forexample,thesharethatthestateandmunicipalities
requiretheiremployeestopayforhealthinsurancecouldberelatedtounderlyinginsurancedemand,or
dateofemployeehirecouldbecorrelatedwithindividualinsurancedemand.
Weaddresstheseconcernsthroughoursecondempiricalspecification:
whereLIMSAVisthesavingsfromswitchingtoalimitednetworkplanforworkeri.Thismeasureis
computedasthedifferenceintheweightedaverageofemployeecontributionstobroadnetworkplans
andtheweightedaverageofemployeecontributionstolimitednetworkplans,measuredasa
percentageoftheemployeecontributionstobroadnetworkplans.Theweightsrepresentthefraction
ofenrolleesineachtypeofplanwhochoseeachspecificplaninabaseperiod,sothatmoreweightis
placedontheemployeecontributionstothemorepopularplans.Becauseweweighttheemployee
contributionsbybaselineenrollmentshares,thecalculationexcludesinformationaboutHarvard
PrimaryChoiceandTuftsSpirit,whichwereaddedasnewinsuranceplanchoicesinfiscalyear2011.
Theuseofaweightedaverageacrossalloftheinsuranceplanoptionsmeansthatthismeasuredoesnot
varyacrossindividualswithinamunicipalityyear.Instead,thismeasurereflectsthesourcesofvariation
thatwereoutlinedabove,includingvariationacrossthestateandmunicipalities,acrosshiredategroups
(i.e.,groupsfacingthesamepremiumsharingrules),andovertime.Theuseofapercentagedifference
insavingsmeansthatwearenotusingvariationinthelevelofsavingsthatarisesfromdifferencesin
premiumsacrossindividualandfamilyplans;thedollarvalueofsavingsfromswitchingtoalimited
networkplanisalwayshigherforfamilyplansthanthedollarvalueofsavingsforindividualplans,but
thepercentagesavingsisalwaysthesame.
ToaddressthepotentialendogenietyofLIMSAV,weincludefixedeffectsforeachmunicipality
andcontrolsforthehiringperiodforstateemployeestocapturethosecorrelatesofinsurancedemand.
Inpractice,sincethemostsignificantvariationinoursamplecomesfromthepremiumholiday,our
resultsaresimilarusingeithermethod.
Itisveryimportanttobeclearontheinterpretationofthekeycoefficient. Ourestimatesof
theimplicationsoflimitednetworkplansforutilizationandoutcomesareidentifiedsolelybythe
compliersthatswitchplansinresponsetofinancialincentives.Thatis,ourestimatesarenota
populationaverageestimateoftheimpactofforcingallenrolleestoenrollinalimitednetworkplan.
12
Butcurrentpolicyconversationscenteraroundemployeeandexchangechoice,whichconsiderlimited
networkplansasachoiceoption,notthemandateddefault.Thatis,ourestimatesprovidetherelevant
estimatesoftheimpactsofofferingfinancialincentivesoftherangedescribedaboveonutilizationand
outcomes.
PartIV:EnrolleePlanChoiceResults
Webeginbyexaminingtheeffectsoffinancialincentivesonthedecisionsofenrolleestoenroll
inlimitednetworkplans.Weestimatetheequationsabove,usingasadependentvariableadummyfor
enrollinginalimitednetworkplan.Weestimateallmodelsaslinearprobabilitymodels,althoughour
resultsareverysimilarifweuseProbits.Standarderrorsareclusteredatthelevelofthemunicipality.
Figure1previewsourfirststagefindings.PanelAgraphsthesavingsfromchoosingalimited
networkplanbyyear,separatelyformunicipalitiesandthestate.Asthefigureshows,municipal
employeesin2010facedlargerpotentialsavingsfromswitchingtoalimitednetworkplan,becausethe
employeeshareofthepremiumswastypicallyhigherforthemthanforstateemployees.Because
limitednetworkplanshavelowerpremiumsthanbroadnetworkplans,ahigheremployeeshareof
premiumsgeneratesmorepotentialsavingsfromchoosingalimitednetworkplan.From2010to2011,
therewasanincreaseinsavingsinbothgroupsfromchoosingalimitednetworkplan.Thisincreasein
savingswaspartiallyattributabletothefactthatbroadnetworkplanshadrelativelylargeincreasesin
premiums,whereasseveralofthelimitednetworkplanshadpremiumincreasesthatwereclosetozero.
Inaddition,increasesintheemployeeshareofpremiumswereimplementedbythestateandbyseveral
municipalities.6From2011to2012,therewasalargeriseinthesavingsfromlimitednetworkplansfor
stateemployees,duetothepremiumholiday,thatwasnotpresentformunicipalemployees.
6
UndertheFY10AppropriationAct,premiumcontributionratesforstateemployeesincreasedby5percentage
points.ThesechangeswerefirstproposedinJune2009andimplementedinAugust2009(Commonwealthof
MassachusettsGroupInsuranceCommission,2011).Thus,whilethepricechangewasimplementedpartway
13
PanelBofthefigureshowsenrollmentratesinlimitednetworkplansovertimeforthestateand
municipalities.Theinitialrateofenrollmentishigherinmunicipalities,whichisconsistentwiththe
higherinitialmunicipalitydiscountforenrollinginsuchplans.From2010to2011,enrollmentinlimited
networkplansrisesinbothgroupsbysimilarmagnitudes,onceagainconsistentwiththeparallelrisein
financialincentivesovertheseyears.From2011to2012,enrollmentinlimitednetworkplansinthe
municipalitiesisfairlyconstant,whereasthereisanenormousjumpinthestateplans,mirroringthe
increaseinpotentialsavingsforstateemployees.Forstateemployees,enrollmentinlimitednetwork
plansrisesbyabout50%between2011and2012.
Table4presentsthesefirststageresultsinregressionform,confirmingwhatisshowninthe
figures.Weestimatethatthepremiumholidayraisedenrollmentinlimitednetworkplansinthestate
byover11percentagepoints,relativetothemunicipalities.Ouralternativeregressionapproach,using
thefullvariationoverthisperiod,yieldsanestimatethateach1percentagepointincreaseinthe
discounttolimitednetworkplansgivesrisetoa0.7percentagepointincreaseintheshareofenrollees
inlimitednetworkplans.Thediscountroseby16percentagepointsfrom2011to2012asaresultof
thepremiumholiday,whichwouldpredictthesame11percentagepointriseinlimitednetwork
enrollment.Theestimatedelasticityoflimitednetworkenrollmentwithrespecttoitspremium
discountis1.28(or0.007*(36.55/0.201)).
Table4alsoshowsthecoefficientsonmanyofthecovariatesincludedinthesefirststage
regressions.Thecoefficientssuggestthatmalesareslightlymorelikelytochooselimitednetworkplans
thanfemalesare.Enrollmentinlimitednetworkplanspeaksbetweentheagesof30and39,and
decreasesconsiderablyasadultsage.
Table5exploresheterogeneityinpricesensitivity,ineachcaseshowingthekeycoefficients
fromthesamespecificationshowninTable4,butestimatedononlythesubsampleofinterest.Wefirst
throughfiscalyear2010,theprimaryimpactonenrollmentchoicesshouldhaveoccurredduringopenenrollment
forfiscalyear2011.
14
considerheterogeneitybyunderlyinghealth,dividingthepopulationintothosewhoareandarenot
chronicallyill.Weidentifythechronicallyillasindividualswithadiagnosis(inanofficesetting)of
hypertension,highcholesterol,diabetes,asthma,arthritis,affectivedisorders,andgastritis,following
Goldmanetal.(2004).Wefindthathealthierenrolleesaremorepricesensitive:thosewhoarenot
chronicallyillareabout20%moreresponsivethanthosewhoarechronicallyill.Thissuggeststhat,
whentheGICofferedfinancialincentivesforenrollmentinlimitednetworkplans,theyimprovedthe
healthmixofthoseplansandworsenedthehealthmixofthoseremaininginbroadnetworkplans,
althoughthedifferentialeffectisnotlarge.
Twokeydeterminantsofswitchingcouldbewhetherindividualscanremainwiththeirinsurer,
andwhethertheycankeeptheirdoctor.WeexploretheseissuesintheremainderofTable5.Wefirst
separatethesamplebyinitialchoiceofinsurer,limitingoursampletothosewhowereenrolledinbroad
networkplansatthebeginningofoursampleperiod.Weseethatthereissomeheterogeneityin
switchingbyinsurer.ThefirststageislargestforFallonenrollees,andsmallestforUnicareenrollees.
Theredoesnotappeartobeanysystematiccorrelationacrosscompanieswiththerestrictivenessof
thenetworksasillustratedearlier.
For79%oftheenrolleesinoursample,wecanidentifytheirprimarycarephysicianbasedon
claimsduringthefirsttwoyearsofoursample.Weidentifytheprimarycarephysicianasthephysician
withaprimarycarespecialtywithwhomtheenrolleehadthemostofficevisitsduringthefirsttwoyears
ofoursampleperiod.Wethenconsiderthreemutuallyexclusivegroups,amongthoseenrolleeswho
werenotyetenrolledinalimitednetworkplaninfiscalyear2011:(a)thosewhoseprimarycare
physicianisinthelimitednetworkversionofthesameinsuranceplaninwhichtheyarenowenrolled,
(b)thosewhoseprimarycarephysicianisinalimitednetworkplan,butnotthatofferedbytheircurrent
insurer,(c)thosewhoseprimarycarephysicianisnotavailablethroughanylimitednetworkplan.We
15
expectenrollmentinalimitednetworkplantobedecliningacrossthesegroups,andindeedthatisin
thecase.
Table5showsthatthatthecoefficientonswitching(thatisidentifiedprimarilybythepremium
holiday)isdecliningacrossthesegroups.7Theeffectforthosewhocanswitchwithoutchanginginsurer
orphysicianisabout60%largerthanforthosewhomustswitchbothinsurerandphysician.Itis
interestingtonotethatover90%oftheseenrolleeshaveaprimarycarephysicianwhoparticipatedinat
leastonelimitednetworkplan.Thissuggeststhatswitchingtoalimitednetworkplandoesnot
necessarilydisruptprimarycarerelationshipsformanyenrollees.
PartV:ResultsforUtilizationandSpending
Havingestablishedourfirststagefactthatfinancialincentivesforlimitednetworkplans
stronglyinfluencechoiceofsuchplans,wenowturntoestimatingtheimpactonpatientoutcomes.The
regressionframeworkisthesameasthatusedintheprevioussection,butourdependentvariablesnow
relatetohealthcareutilizationandoutcomes.
Theseregressioncoefficientscanbeinterpretedasreducedformestimatesoftheimpactof
financialincentivesonpatientoutcomes.Ifwenormalizebythefirststageestimatesoftheimpactof
financialincentivesonplanchoice,wecanobtainanimplicitinstrumentalvariablesestimateofthe
effectofenrollinginalimitednetworkplanonoutcomes.Asnotedearlier,thisIVestimateisvalidonly
forthemarginalindividualsinducedtoswitchplansbyfinancialincentives,andnotforindividuals
randomlyenrolledinalimitednetworkplan.
Sinceourdependentvariablesfeaturebothmanyzerosandalargedegreeofskewness,we
estimateourmodelsbyagenerallinearmodel(GLM).Intheabsenceofzeroes,wewouldwanttouse
7
Ofcourse,theseresultssufferfromsomecensoringbiasthosewhosephysicianisinalimitednetworkplanmay
havebeenmostlikelytoswitchbeforethepremiumholiday.Thiswouldmostlikelyleadustounderstatethe
impactofthefinancialincentivedifferentialacrossgroups.
16
ln(spending)asourdependentvariableandestimateourmodelsusingOLS.However,thepresenceof
observationswithzerospendingmakesthisaproblematicstrategy,sowefollowtheliteratureand
estimateGLMwithaloglinkfunction(BuntinandZaslavsky,2004).Inthisapproach,theconditional
meanismodeledas:
Thisapproachallowsustoavoidselectiononthedependentvariableandalsogeneratescoefficients
thatareinterpretableaspercentagechanges.8
TotalImpactonSpending
WepreviewtheresultsfortotalspendingwithFigure2,whichshowsthetrendsintotal
spendingforstateandmunicipalemployees.Forthisfigure,weusequarterlydataontotalspending,in
ordertoshowmorepreciselythetimingofanychangesintotalspending.Thisfigureshowsthat
spendingtrendsverycloselyforstateandmunicipalemployeesovertimebeforethepremiumholiday,
withstateemployeeshavingconsistentlyhighertotalspending(onceagainconsistentwithhigher
enrollmentinlimitednetworkplansbymunicipalemployees).Thereisthenaveryclearrelativedecline
intotalspendingforstateemployees,whichbeginsinthefirstquarteroffiscalyear2012andbecomes
evenstrongerinsubsequentquarters.Thefactthatthespendingpatternsforstateemployees,as
comparedtomunicipalemployees,mirrorsthepatternsofenrollmentinlimitednetworkplansseenin
Figure1isquitesuggestiveofacausallink.
InTable6,weformalizethisanalysisusingourregressionframework.Therearetwocolumnsin
thetable,representingourtwoidentificationstrategies:theDDstrategyisusedinthefirstcolumn,
8
IncontrasttoGLM,OLSmodelsE(lnSpending|X)imt=+LIMSAVimt+MUNIimt+YEARimt+Ximt+
imt.Asaresult,OLSgeneratescoefficientsthataredifficulttotranslateintostatementsaboutE(Spending).The
traditionalsolutionhasbeentouseasmearingestimatortoconvertpredictionstotheunloggedscale(Manning
etal.,1987).However,theseretransformationsarebiasedinthepresenceofheteroskedasticity(Buntinand
Zaslavsky(2004),ManningandMullahy(2001)).
17
whilethepricevariationstrategyisusedinthesecondcolumn.Ineachcell,wepresenttheGLM
estimateoftheeffectonaspendingmeasure.Ifonewishestointerprettheseasstructuralestimates
fortheimpactofbeingenrolledinalimitednetworkplanthen,asnotedabovetheDDestimatesshould
bemultipliedby1/0.116=8.6,andthepricevariationestimatesshouldbemultipliedby1/0.0070=143.
Webegininthefirstrowbymodelingtotalspending.Weestimateamarginallysignificant4%
declineinthelevelofmedicalspending.Normalizingbythefirststageeffect,thisimpliesthat,forthe
marginalswitcher,thereisa36%declineintotalspendingwhenmovingtoalimitednetworkplan.This
isaverysizeableimpact.Ontheotherhand,themagnitudeofthedeclineisquiteconsistentwiththe
differenceintotalpremiumsforthetwotypesofplans.Indeed,themeanreductioninoutofpocket
premiumforanenrolleetoswitchfromanaveragebroadnetworkplantoanaveragelimitednetwork
planinoursamplewas36.55%,asshowninTable3.Ourresultssuggestthatthepremiumdifferential
forlimitednetworkplansisdrivennotmerelybypositiveselection,butbyasubstantivedifferencein
costspercapita.9Theresultsusingfullvariation,whennormalizedbytherelevantfirststageresults,
generateverysimilarresults:forthemarginalswitcher,thereisa41%declineintotalspending.The
factthatourtwoidentificationstrategiesgeneratesuchsimilarresultshere,andthroughoutthe
subsequentresults,isreassuring.
Wethenturntomodelingspendingbysubcategoryofmedicalutilization.Wefindalarge
(albeitonlymarginallysignificant)declineinofficespending,withtheDDestimateimplyingaroughly
16%declineinofficespendingforthemarginalswitcher.Weestimateareductioninhospitalspending
whichisalsoverylarge,butstatisticallyinsignificant.Unfortunately,theconfidenceintervalsforour
9
Asimpleregressionofspendingonlimitednetworkplanenrollment,ignoringtheendogeneityoflimitednetwork
enrollment,yieldsacostsavingsestimateof30%.Itissurprisingthatthecausalimpactonspendingislargerthan
theOLSeffect,giventhatthelatterincludesselectioneffects.Thispartlyreflectsrelativelylimitedselection:the
averageageofthoseenrolledisonly3yearsyoungerthanthosenotenrolled,andtheoddsofchronicillnessis
onlyabout10%lower.Thismayalsopartlyreflectdifferencesbetweenthemarginalcomplierwiththepolicy
changeandtheaverageenrolleeinlimitednetworkplans,ordifferencesinthelongruneffectofenrollment
versusfirstyeareffects.Nevertheless,theresultssuggestthatmostofthesavingsfromlimitednetworkplansis
fromreducedspendingbyenrollees,notjustpositiveselection.
18
inpatienthospitalspendingresultsarefairlywide,leavingusunabletoruleoutalargefallorrisein
hospitalspending.
Wedo,however,findalargeandmarginallysignificant5%declineinoutpatienthospital
spendingintheDDspecification,implyinga43%reductioninoutpatientspendingforthemarginal
switcher.Resultsforoutpatientspendingaresimilarinmagnitude,andstatisticallysignificant,inthe
specificationthatusesthefullpricevariation.Weseeanevenlargerreductioninlabspendingof8%in
theDDspecification,implyinga71%reductioninlabspendingforthemarginalswitcher.Wehave
furtherexploredthelabresultsandfoundthatlabspendingassociatedwithofficevisitsdoesntfall
significantly;rather,themajorchangeisinlabspendingassociatedwithoutpatientandemergency
roomsettings.
Wefindacorrespondinglylargereductioninemergencyroomspending.Thisisstrikingbecause
itdefiesthenaturalhypothesisthatwhenindividualshavetheirphysicianchoiceslimitedtheywould
tendtousemoreemergencyroomcare.Wehavefurtherbrokenemergencyroomvisitsbytypeof
visit,andfindthatabouttwothirdsofthereductionisfromreduceduseoftheemergencydepartment
fortreatmentofinjuries.
Wefindnomeaningfulimpactonprescriptiondrugspending,butalargeimpactonother
spending.Whenwebreakdownotherspendingintoitsconstituentcomponents,theresultsimply
thatthereareparticularlylargereductionsinhomehealthcarespendingandambulancespending,
althoughneitherissignificantonitsown.Itisworthnotingthatotherspendingconstituteslessthan
5%oftotalspending,sodeclinesinthiscategoryofspending,whilelargerinpercentageterms,are
relativelyunimportantinexplainingtheaggregatedeclineinspending.Rather,ifonetakesthepoint
estimatesseriously,thechangesthatappeartobemostimportantindrivingthe4.2%declineintotal
spendingincludethe5.0%declineinoutpatientspendingandthe(statisticallyinsignificant)5.6%decline
ininpatientspending,whichtogetheraccountformorethanhalfoftheoveralldeclineintotalspending.
19
GiventherobustnessofourfindingstothetwoempiricalstrategiesusedinTable6,forthe
remainderofthepaperwepresentonlythemoreeasilyinterpretabledifferenceindifferenceresults.
Allresultspresentedbeloware,notsurprisingly,consistentusingthefullermeasureofincentives.
DecomposingSpendingImpacts
ThelargeimpactsontotalspendingthatareapparentinFigure2canbefurtherdecomposedto
assesswhetherthesavingsarisefromareducedquantityofcareorlowerpricespaidforafixedamount
ofcare.WeshowtheresultsofthisdecompositioninFigure3.InPanelA,weshowthechangesin
costsperservicetype,weightedbyfixedquantitiesofcareforeachservices.Thesefixedquantitiesare
basedonaverageutilizationforeachservicecategory(primarycareofficevisits,specialistofficevisits,
otherofficevisits,inpatientcare,outpatientcare,ERvisits,labs,prescriptiondrugs,andothercare)for
broadnetworkenrolleesinFY2010.Costsperserviceareallowedtovary,onaverage,overtimeand
acrossstatevs.municipalenrollees.Interestingly,averagecostsperservicearesimilarforstateand
municipalenrolleesatthebeginningofthesampleperiod,withcostsforstateenrollees,ifanything,
lowerthancostsformunicipalenrolleesinFY2011.Butcostsperserviceseemtodeclinerelatively
moreforstateenrolleesafterthepremiumholiday,especiallytowardstheendofFY2012.Thisfigure
suggeststhatthedeclineinspendingamongstateenrolleesispartiallyattributabletoarelativedecline
inperservicecosts.
PanelBofFigure3showsthechangesinquantitiesofeachtypeofservice,weightedbyfixed
costsofcare.Thefixedcostsarebasedonaverageperserviceallowablecostsforeachtypeofservice
forbroadnetworkenrolleesinFY2010,whilequantitiesareallowedtovaryovertimeandacrossstate
vs.municipalenrollees.Stateenrolleeswereclearlyusingagreateramountofcarethanmunicipal
enrolleesinFY2010andFY2011,butthemagnitudeofthegapdeclinesvisiblybeginningatthetimeof
20
thepremiumholiday.Basedonthesefigures,itappearsthatdeclinesinpricesandquantitiesbothplay
aroleinreducingspendingforstateenrolleesafterthepremiumholiday.
Table7examinesthisissue,inaregressionframework,fordifferentcategoriesofservice.It
extendsTable6bypresenting,inadditiontoourGLMspendingresults,resultsformeasuresofquantity
ofcareandforcostspervisit.Specifically,itshowsOLSresultsforadummyvariableforanyutilization
ofthattypeofservice,fornumberofinstancesofutilization(visits,stays,tests,drugprescriptions,etc),
andforaveragecostperinstanceofutilization(conditionalonsomeutilization).Theresultsshownhere
areallsimilarifweuseProbitmodelsfortheanyvisitsoutcome,orifweusePoissoncountmodelsfor
thenumberofvisitsoutcome.
Wefindthatthereisnochangeintheoddsofhavinganofficevisit,butthatthenumberofvisits
fallssignificantly,by0.15offabaseof7.36visitsonaverage.Thereisnoeffectonpervisitcost.For
inpatientutilization,weonceagaindonotfindanyresultsofstatisticalsignificance.Thepoint
estimates,however,aremoreconsistentwithadeclineincostspervisitthanwithadeclineininpatient
hospitalvisits.Foroutpatientutilization,wedofindareductionintheoddsofanyoutpatientvisit,in
thenumberofvisits,andinthecostpervisit.Foremergencyroomutilization,therearereductionsinall
measures,buttheonlysignificantchangeisareductioninthenumberofvisits.Forlabs,wefinda
reductioninboththeleveloflabresultsandthecostperresult,whichproducesthesignificanttotal
dropinspending.Theresultsforprescriptiondrugutilizationareinteresting.Asnotedearlier,thereis
nonetimpactonprescriptiondrugspending.Butthisappearstoreflectasignificantreductioninthe
numberofprescriptions(areductionof0.4prescriptionsonabaseof11.7prescriptions),offsetbya
large(althoughnotsignificant)riseinthecostperprescription(ariseof$2.08offabaseof$77).We
alsoseealargeandstatisticallysignificantdeclineinthequantityofothercare.
Overall,theresultsareconsistentwiththevisualimpressionfromthetwopanelsofFigure3,
whichsuggestedthatthereducedspendingisattributabletoreductionsinbothquantityandprice.The
21
resultsinTable7indicatethatthepremiumholidayisassociatedwithdeclinesinthequantityofcare
acrossallcategoriesofservice,withstatisticallysignificanteffectsonofficevisits,emergencyroom
visits,prescriptiondrugs,andothervisits.Theresultsindicatethatpremiumholidayisalsoassociated
withdeclinesinthepervisitcostforeverycategoryofcare,exceptprescriptiondrugs,withstatistically
significantresultsforoutpatientvisits.
TypeofPhysician
Theresultsforphysicianofficeutilizationsuggestthepotentialvalueofafurtherdecomposition
bytypeofphysician.Table8followsthesameformatasTable7,butfurtherdecomposestheresults
forofficevisitsbytypeofprovider.
Thefirstpaneldecomposesofficevisitsintovisitstoprimarycarephysicians,specialists,and
others,usingdataonproviderspecialtyforallprovidersinMassachusetts.Theotherprovider
category,whichaccountsfor7%ofofficevisits,includesoutofstateprovidersaswellasother
providersthatwewereunabletomatchtoaspecialty.Thedifferencesacrossthesegroupsisstriking.
Wefindthatthatprimarycareofficevisitsincrease,withastatisticallysignificant3%riseinspendingin
thereducedform,implyingaroughly28%riseinspendingonprimarycareforthosewhomoveinto
narrownetworks.10Atthesametime,visitstospecialistsfallsignificantly,withalarge5%declinein
spendinginthereducedformimplyingaroughly45%reductioninspecialistspending.Forother
physicians,thereisasignificantdeclineinvisits,butanoffsettingsignificantriseincostpervisit,
resultinginaninsignificanteffectonspending.Theseresultssuggestthatenrollmentinalimited
networkplanisassociatedwithashifttowardsprimarycareandawayfromspecialistcare.
10
In2013,GICintroducedaCenteredCareIntegratedRiskBearingOrganizationInitiativethatmayhaveaffected
themixofprimaryandspecialistcareuse.However,thatinitiativewasintroducedafteroursampleperiodended,
socannotexplainourfindingofincreasedprimarycareanddecreasedspecialistcareuse.
22
Thesecondpaneldecomposestheofficevisitsinsteadintovisitstophysiciansthatthepatient
hadseenpreviously,andvisitstothosethatthepatienthadnotseen.Ofcourse,wecanonlyidentify
whetherapatienthaspreviouslyseenaphysicianiftheencounterappearsinourclaimsdata;sincewe
donotobserveanentirelifetimeofclaimsdataforeachindividual,wewilloverstatethenumberof
newproviders.Weknowthattheproportionofprovidersthatweidentifyasnewwillbeartificially
highatthebeginningofourclaimsdata,andwilldecreasemechanicallyovertime.Wethereforerelyon
afulladditionalyearofclaimsdata,extendingbacktoJuly2008,toidentifynewandoldproviders,
whilecontinuingtofocusouranalysisontheperiodbeginninginJuly2009.Thedisadvantageofthis
approachisthatourregressionsincludeonlyindividualswhowerecontinuouslyenrolledforfouryears
(or84%ofourbaselinesample).Buttheadvantageisthatwedecreasethemeasurementerrorinour
classificationofnewvs.oldproviders.Importantly,thereisnoreasontoexpectdifferential
measurementerrorinourclassificationofnewandoldprovidersforstateandmunicipalemployees,so
wedonotbelievethatourcoefficientsarebiasedbythisissue.
Thereisasizeablereductioninvisitstoproviderswhomthepatienthadpreviouslyseen,aswell
asareductionincostpervisit,sothattotalspendingonsuchphysiciansfallsby3.4%.Fornew
providers,thereisasizeableriseintheoddsofavisit,thenumberofvisits,andcostpervisit,sothat
totalspendingonnewprovidersrisesby5.6%.Giventhatthemeanspendingonoldprovidersis$771,
whileonnewprovidersitis$304,thisisconsistentwithanoverallfallinphysicianspending.Overall,
shiftingtolimitednetworkplansappearstocauseashiftawayfromtraditionalproviderstowardsnewer
(lowercost)options.Thenewproviderschosenbyindividualsaremarginallymoreexpensivethannew
providerschosenpreviously,butnotenoughtooffsetthecostdifferencebetweennewandold
providers.
23
PartVI:ImpactonPatientAccess
Afullanalysisoftheimpactoflimitednetworkplanswouldincludeeffectsonpatientoutcomes.
Unfortunately,ourdatadonotcontainhealthoutcomemeasures.Typicallyusedprocessmeasures,
suchasavoidablehospitalizations,relyoninpatientdatawhereourprecisionislimited.Oureffortsto
investigatesuchvariableshavefoundnoeffectsbutverywideconfidenceintervals.Wehavealsotried
toassessimpactsonpatientmortality,andonceagainourestimatesweresimplytooimprecise.11
Thereisoneimportantoutcomethatisthecurrentfocusofmuchdebateoverlimitednetwork
plans,however:patientaccesstoprovidersasproxiedbydistancetraveled.Amajorconcernraised
aboutlimitednetworkplansisthatitwillleadpatientstohavetotravelmuchfurthertoseetheir
providers.Wecanaddressthisconcernwithourdatabyexaminingthedistancebetweenpatientsand
theproviderstheydoseewhentheyjoinlimitednetworkplans.Todoso,weusethedistancebetween
thecentroidofpatientandproviderzipcodesinourdata,foreveryproviderpatientpairthatwe
observe.
TheresultsofthisanalysisareshowninthetoppanelofTable9.Wefindthatoverallthereis
nosignificantimpactondistancetraveledforanofficevisit.Butwefindthatthismasksimportant
heterogeneitybytypeofofficevisit:distancetraveledforprimarycarevisitsfallsby0.65milesinour
reducedformestimates,orbyabout5.6milesasourimpliedIVcoefficient;thisismorethanhalfofthe
baselinedistancetraveledforprimarycare.12Ontheotherhand,distancetraveledrisesforspecialists,
11
Whilewedontobservemortalitydirectlyinourdata,wecanexaminetheprobabilityofexitfromthefull
sampleand,inparticular,exitfromafamilyplanwhentherestofthefamilyremainsenrolledatagesthatarenot
associatedwithexitsduetocollegegraduationorMedicareenrollment.Inthefullsample,thepremiumholidayis
associatedwithastatisticallyinsignificant0.014percentagepointdeclineintheprobabilityofsuchanexit.Witha
standarderrorof0.04percentagepointsandameanexitrateof0.4percent,welacktheprecisiontorejecta
meaningfulincreaseordecreaseinsuchexits.Wealsoexaminedthisexitrateforavarietyofsubsamplesand
foundnostatisticallysignificanteffects.
12
Itispossibletoobserveanegativeimpactonprimarycaredistanceasaresultofcompositionalchangein
primarycarevisits.Weobservethatlimitednetworkenrollmentiscorrelatedwithanincreaseinprimarycare
visitsand,totheextentthatthoseadditionalvisitsaretoproviderswhoarerelativelyshortdistancesawayfrom
thepatients,itispossibletofindthatlimitednetworkenrollmentisassociatedwithadeclineinaverageprimary
caredistance.
24
althoughnotsignificantly.Wefindthatthosepatientswhocontinuetoseetheiroldprovidersare
travelingshorterdistancestodoso,butthatthosepatientswhoseenewprovidersaretravelingfarther;
thelattereffectisfairlysizeable,withanimpliedIVcoefficientofabout7miles,orabouttwothirdsof
themeandistancetraveledtonewproviders.
WefindthatpatientstravelshorterdistancesforoutpatientandERvisits,butthattheytravel
muchfarthertothehospital.TheimpliedIVcoefficientontraveltohospitalssuggeststhatthemarginal
patientswitchingtoalimitednetworkplantravelsalmost40milesfurthertothehospital.However,
thiscoefficienthasalargeconfidenceintervalaroundit,sowecannotexcludeconsiderablysmaller
increasesinthedistancetravelled.
Arelatedconcernisthatlimitednetworkplansrestrictpatientaccesstohighqualityproviders.
Inparticular,onemightbeconcernedthatlowercostsarecorrelatedwithlowerquality.Toassessthis
concern,weobtainedeightmeasuresofhospitalqualityforMassachusettshospitalsandmatchedthem
tothehospitalizationsinoursample.Ourqualitymeasuresincludethe30daymortalityrates
associatedwithhospitalizationsforheartattacks,heartfailure,andpneumoniaforeachhospital.In
addition,ourmeasuresincludedthe30dayreadmissionratesassociatedwithhospitalizationforheart
attack,heartfailure,pneumonia,hiporkneesurgery,andallcauses.
InthebottompanelofTable9,wereportresultsfromregressionsthatareexactlylikethe
regressionsinthetoppanelofTable9,exceptthattheyusequalitymeasuresforeachenrollee
(conditionalonhospitalization)asthedependentvariable.Theresultsarenotsuggestiveofanyimpact
onquality.Theresultsareuniformlystatisticallyinsignificant,andtheyareequallylikelytobenegative
(suggestinghigherquality)astheyaretobepositive(suggestinglowerquality).Inaddition,thepoint
estimatesareverysmallrelativetothemeans.Asaresult,weconcludethatenrollmentinlimited
networkplansisnotassociatedwithanychangeinthequalityofaccessibleinpatienthospitalcare.
25
PartVII:HeterogeneityInResponses
Itispossiblethattheimpactsoflimitednetworkplansvaryconsiderablybytypeofpatient.We
considerinparticularthreetypesofheterogeneityintheanalysis.
Aparticularconcernisthatmovingtoamorelimitednetworkplanmayhavesignificant
negativeconnotationsforthemostillpatients.Table10ashowstheresultsseparatelybychronicillness
status.Wefindthattheoveralleffectonspendingissimilarforthechronicallyillandnonchronicallyill,
althoughgiventhelargerfirststageforthelattergroup,thisimpliessomewhatlargereffectsforthe
marginalchronicallyillindividualwhowasinducedtoswitchbythefinancialincentives.Most
importantly,wedonotfindanyevidencethatlimitednetworkplanscauseddifficultiesinphysician
accessforthechronicallyill.Indeed,wefindastrongshiftinspendingfromspecialiststoprimarycare
physicians,withspendingfallingconsiderablyfortheformerandrisingforthelatter.Wealsofindthat
forthechronicallyillthereisasignificantreductionininpatientspending,andnostatisticallysignificant
impactonemergencyroomuse.Takentogether,theseresultsdonotindicateanyparticularcausefor
concernforthechronicallyillfromswitchingtoalimitednetworkplan.
Thenextdimensionofheterogeneitythatweconsiderisbywhetherpatientsprimarycare
physicianswereincludedinlimitedplannetworks.Asdescribedearlier,wedividethesampleintothose
whocouldkeepboththeirinsurerandtheirprimarycareprovider,thosewhocouldkeeptheirprimary
careproviderbuttodosowouldhavetoswitchtoadifferentinsurer,andthosewhocouldnotkeep
theirprimarycareprovideriftheyswitchedtoalimitednetworkplan.
TheresultsofthisanalysisareshowninTable10b.Wefindthatthelargestdeclinesinspending
areforthosewhoareabletokeeptheirprimarycarephysician,eitherbymovingtothelimitednetwork
versionofthecurrentinsurersplanorbymovingtoanotherlimitednetworkplan.Forthesegroups
primarycarevisitsrise,andspecialistvisitsfall.Forthosestayingwiththesameinsurer,thereisamore
modestchangeinbothmeasures;forthosekeepingtheirdoctorbutswitchinginsurers,thereisamuch
26
moresizeablereductioninspecialistuse.Thisisaninterestingfindingwhichsuggeststhatdoctors
changetheiruseofspecialistsdependingonthenetworkavailabilityofthosespecialists.
Forpatientswhocankeeptheirphysician,wealsoseenochangeinhospitalizationrates,buta
declineinhospitalspending,consistentwiththeideathatthelimitednetworkcausesthemtochoosea
lowercosthospital.Inaddition,therearestatisticallysignificantdeclinesinoutpatientspendingand
utilizationforthesegroups.
Forthosewhoseprimarycarephysiciandoesnotparticipateinalimitednetwork,incontrast,
theimpactonspendingispositiveandstatisticallyinsignificant,withlittlechangeofsignificanceinmost
categoriesofspending.Thisisdespitethefactthatthereisasignificantresponsetothefinancial
incentivesinthisgroupintermsofswitchingtoalimitednetworkplan.Thesefindingssuggestthatthe
poweroflimitednetworkplanstolowercostsdependscriticallyonthosewhoretaintheirprimarycare
physicianthroughtheswitchingprocess.Thisfurtherimpliesthattheabilitytoextrapolateourfindings
dependscriticallyonhowlimitednetworkplanslimitaccesstoprimarycarephysicians;thoseplansthat
haveverynarrownetworksofprimarycarephysiciansmaybelesssuccessfulincontrollingcosts.
Finally,weconsiderheterogeneitybytypeofillness:whichtypesofillnessaredrivingthese
results?Weclassifiedallofthespendinginoursamplein19majordiagnosticcategoriesbasedonthe
primaryICD9codes.13AsshowninTable11,therearenegativeimpactsonspendingforabouttwo
thirdsofourdiagnosiscategories.Noneofthecategorieswithpositivespendingimpactsaresignificant.
Incontrast,wefindfourcategoriesofspendingforwhichtheeffectsarenegativeandsignificant:
Neoplasms,RespiratoryDiagnoses,MusculoskeletalDiagnoses,andInjuriesandPoisonings.Thus,our
findingsarenotdrivenbyjustonecategoryofspending,butappearbroadlyspreadacrossthediagnosis
spectrum.
13
Spendingforanencountercouldbeclassifiedintomorethanonecategoryifthereweremultiplediagnoses.
Thiscouldhappenif,forexample,anindividualwashospitalizedwithmorethanoneprimarydiagnosisacrossthe
claimsgeneratedbythehospitalization.Asaresult,thesumofspendingacrossall19diagnosticcategoriesis
greaterthantotalspending.
27
PartVIII:Conclusions
Thedebateovertheimpactoftheshifttonarrownetworkplanshaslargelyproceededinan
evidencevacuum.Thispaperattemptstomoveforwardourunderstandingofhowindividualschoose
suchplansandtheirimplicationforutilizationofhealthcare.
Wefirstfindthatpatientsareverypricesensitiveintheirdecisionstoswitchtolimitednetwork
plans,withapriceelasticityaboveone.Thereismodestadverseselectionassociatedwithsuchprice
incentives,asthosewhoaremosthealthyarethemostpricesensitive.
Wethenshowthatthelargepremiumdifferentialbetweenbroadandlimitednetworkplansis
drivennotbyselectionbutbyrealreductionsinspendingamongthoseinducedtoswitchplans.This
reductioninspendingcomesfrombothreductionsinpricespaidandquantityofcareused.The
reductioninspendingdoesnotappeartocomefromreducedaccesstoprimarycare;indeed,useof
primarycareandspendingonsuchservicesrisesforthoseswitchingtolimitednetworkplans.Rather,
thereductionarisesfromlessuseofspecialistsandhospitalcare.Thefactthatprimarycareuseis
rising,whileemergencyroomandhospitalspendingisfalling,suggeststhatthemovetolimitednetwork
plansisnotadverselyimpactinghealth,althoughweareunabletodemonstratehealtheffectswithany
certainty.Wefindthatdistancetraveledfallsforprimarycareandrisesfortertiarycare,althoughthere
isnoevidenceofadecreaseinthequalityofhospitalsusedbypatients.
Wealsofoundthatthepositiveeffectsonprimarycareandreductionsinspendingon
specialist/hospitalcareoccurforbothmoreandlesshealthypatients,andthatthespendingreduction
holdsforabroadspectrumofillnesses.Wedofind,however,thatthespendingreductionisdriven
primarilybythosewhoareabletokeeptheirprimarycarephysicianwhenmovingtoalimitednetwork
plan.Takentogetherwithouroverallfindingsonprimarycare,weconcludethattherealsavingsfrom
limitednetworkplansarisesfromrestrictionsdownstreamfromtheprimarycareprovider.
28
Onenaturalquestionthatarisesfromourfindingsiswhetherthepremiumincentivesprovided
bytheGICwerefiscallybeneficialtothestateofMassachusetts.Theanswertothisquestionappearsto
beYes.Wecalculatethattheemployerpremiumcontributionsthatwerepaidforallindividualand
familyplanenrolleesinfiscalyear2012was1.2%percentlowerthanitwouldhavebeenintheabsence
ofthepremiumholiday.This1.2%reductioninemployerpremiumcostscombinesa2.8%reductionin
theemployershareofthelowerpremiuminlimitednetworkplansarisingfromthe11.6percentage
pointincreaseinlimitednetworkenrollmentthatwecalculatedinourfirststageanda1.6%increasein
theemployersshareofallpremiumsduetothepremiumholiday.Infutureyears,ifthesamegroupof
enrolleeswhorespondedtothepremiumholidayweretoremainenrolledinlimitednetworkplans,the
savingswouldbeexpectedtobeapproximately2.8%.Whilesomeofthemarginalenrolleesmight
switchbacktobroadnetworkplans,thereisagreatdealofinertiaininsuranceplanenrollment.14We
haveanalyzedaggregateenrollmentdatafortheyearsfollowingthepremiumholiday,andthepatterns
areconsistentwiththeideathatthevastmajorityofthenewlimitednetworkenrolleeswhowere
inducedtoswitchbythepremiumholidayremainedinlimitednetworkplansinsubsequentyears.
While31.2%ofallenrolleescoveredbyactivestateemployeeswereenrolledinlimitednetworkplansin
FY2012(theyearthatthepremiumholidaytookeffect),30.4%wereenrolledinlimitednetworkplans
inFY13and31.1%wereenrolledinFY14.Bycomparison,25.1%ofallenrolleescoveredbyactive
municipalemployeeswereinlimitednetworkplansinFY12,24.5%ofthemwereenrolledinlimited
networkplansinFY13,and26.9%wereenrolledinFY14.Thisinertiainplanenrollmentssuggeststhat
thefiscalbenefitsofthe2012premiumholidaywerelikelymuchlargerinsubsequentyearswhenthe
premiumholidaywasnolongerinplace,sincethestatebenefitedfromareducedpremiumbillwithany
offsettingincreaseintheemployershareofthepremium.
14
Inoursample,only3%ofthosewhowereenrolledinbroadnetworkplansinFY2010switchedtolimited
networkplansforFY2011;similarly,only1%ofthosewhowereenrolledinlimitednetworkplansinFY2010
switchedtoabroadnetworkplaninFY2011.
29
Themostimportantcaveattoourresultsisthattheyapplytooneparticularexample,andthat
wemaynotbeabletoextrapolatethemtootherlimitednetworkplans,forexamplethosefeaturedon
stateexchanges.Animportantgoalforfutureworkshouldbetoextendthisanalysistothoseother
examples.ThisshouldbefeasiblegiventhatthetaxcreditsavailableundertheACAprovidedistinctly
nonlinearpricedifferentialsacrosshealthinsuranceoptions,allowingfutureresearcherstoassesshow
thoseinducedintolimitednetworkplansonexchangesarefaringintermsofhealthcarespendingand
outcomes.
30
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CommonwealthofMassachusettsGroupInsuranceCommission(2012).FiscalYear2012Annual
Report:LeadingtheWayinHealthCare,December2012.Downloadedfrom
http://www.mass.gov/anf/docs/gic/annualreport/arfy2012.pdfonMarch5,2014.
CommonwealthofMassachusettsGroupInsuranceCommission(2011).FiscalYear2010Annual
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fromhttp://www.mass.gov/anf/docs/gic/annualreport/arfy2010.pdfonMarch7,2014.
Frank,Matt,JohnHsu,MaryBethLandrumandMichaelChernew(2014).TheEffectsofaTiered
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http://money.cnn.com/2014/03/19/news/economy/obamacaredoctors/AccessedMay7,
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Manning,WillardG.andJohnMullahy(2001).EstimatingLogModels:ToTransformorNotto
Transform?,JournalofHealthEconomics20(4):461494.
Manning,WillardG.,JosephP.Newhouse,NaihuaDuan,EmmettB.Keeler,andArleenLeibowitz(1987).
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Pickert,Kate(2014).KeepingYourDoctorUnderObamacareisNoEasyFeat,Time,January1,
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Weisman,RobertandChelseaCanaboy(2011).TieredHealthPlansCuttingCosts,RestrictingOptions,
TheBostonGlobe,November28,2011,p.A1.
31
Figure1
PanelA:TheMonthlySavingsfromSwitchingtoaLimitedNetwork,
asaPercentageofAverageBroadNetworkPremiumContribution
MonthlySavingsfromSwitching
55
50
45
Percent
40
35
30
25
20
2010 2011 2012
FiscalYear
Municipalities State
PanelB:EnrollmentinLimitedNetworkPlans,asaPercentageofTotalEnrollment
EnrollmentinLimitedNetworkPlans
35
30
25
Percent
20
15
10
5
0
2010 2011 2012
FiscalYear
Municipalities State
32
Figure2:TotalQuarterlySpendingperCapita
TotalSpendingPerCapita
1500
1400
1300
1200
1100
1000
900
2010q1
2010q2
2010q3
2010q4
2011q1
2011q2
2011q3
2011q4
2012q1
2012q2
2012q3
2012q4
FiscalYear
Municipality State
33
Figure3:DecompositionofChangesinTotalQuarterlySpendingperCapita
PanelA
QuantitiesFixedat2010BroadNetwork
Level,PricesVarying
1450
1400
1350
1300
1250
1200
1150
1100
2010q1
2010q2
2010q3
2010q4
2011q1
2011q2
2011q3
2011q4
2012q1
2012q2
2012q3
2012q4
Municipality State
PanelB
QuantitiesVarying,
PricesFixedat2010BroadNetworkLevel
1250
1200
1150
1100
1050
1000
2010q1
2010q2
2010q3
2010q4
2011q1
2011q2
2011q3
2011q4
2012q1
2012q2
2012q3
2012q4
Municipality State
34
Table1:Detailsof2010GICPlanOptions
Limited
Enrollmentin TypeofPlan Network
PlanName June2010 Plan
FallonCommunityHealthPlanDirectCare 1% HMO Yes
FallonCommunityHealthPlanSelectCare 3% HMO No
HarvardPilgrimIndependencePlan 26% PPO No
HarvardPilgrimPrimaryChoicePlan 0% HMO Yes
HealthNewEngland 6% HMO Yes
NeighborhoodHealthPlan 1% HMO Yes
TuftsHealthPlanNavigator 31% PPO No
TuftsHealthPlanSpirit 0% HMOtype Yes
UniCareStateIndemnityPlanBasic 17% Indemnity No
UnicareStateIndemnityPlanCommunityChoice 6% PPOtype Yes
UnicareStateIndeminityPlanPLUS 9% PPOtype No
35
Table2:MeasuresofNetworkBreadth
Physician Hospital
>5Claims >10Claims >5Claims >10Claims
Averageacrossallplans
Broad 0.250 0.212 0.776 0.710
Narrow 0.135 0.107 0.541 0.419
HarvardPilgrim
Broad:Independence 0.367 0.315 0.963 0.901
Narrow:PrimaryChoice 0.110 0.077 0.570 0.418
Tufts
Broad:Navigator 0.351 0.312 0.827 0.815
Narrow:Spirit 0.054 0.034 0.329 0.158
Unicare
Broad:Basic 0.263 0.220 0.926 0.864
Broad:Plus 0.199 0.160 0.802 0.728
Narrow:CommunityChoice 0.166 0.128 0.650 0.563
Fallon
Broad:Select 0.069 0.052 0.360 0.240
Narrow:Direct 0.066 0.051 0.400 0.200
OtherNarrow
HealthNewEngland 0.353 0.313 0.923 0.923
NeighborhoodHealthPlan 0.059 0.041 0.373 0.253
Notes:Thistableshowstheproportionofproviderslocatedinthecountieswheretheinsuranceplanoperatesfor
whomweobserveatleast5(or10)innetworkclaims.
36
Table3:SummaryStatistics
Mean
Variable (StandardDeviation)
EnrolledinLimitedNetworkPlan 0.201
(0.400)
Savingsfromswitchingtolimitednetworkplan 36.55%
(asa%ofemployeecontributiontobroadnetwork (9.64)
plan)
Spending Visits
Totalexpenses $4,811
(15,132)
Officevisits $1,084 7.36
(2,155) (9.69)
PrimaryCare $323 2.17
(653) (2.92)
Specialist $676 4.60
(1799) (8.31)
Other $85 0.55
(762) (2.56)
OldProvider $771 5.64
(1,937) (8.37)
NewProvider $304 1.43
(546) (1.68)
InpatientHospitalization $864 0.053
(8,117) (0.297)
OutpatientHospital $1,443 3.76
(7,200) (8.12)
EmergencyRoom $235 0.220
(995) (0.635)
Lab&Xrays $69 0.550
(336) (1.463)
Drugs $900 11.69
(4,417) (17.03)
Other $210 0.70
(3,324) (4.38)
Numberofobservations 479,196
37
Table4FirstStageRegressions
Differenceindifference Fullvariation
Stateemployees*Post 0.1165**
(0.0036)
RelativePriceofLimitedPlans 0.0070**
(0.0002)
Male 0.0011** 0.0011**
(0.0004) (0.0004)
Age1929 0.0067** 0.0068**
(0.0010) (0.0010)
Age3039 0.0236** 0.0236**
(0.0036) (0.0036)
Age4049 0.0019 0.0019
(0.0020) (0.0020)
Age5059 0.0212** 0.0212**
(0.0037) (0.0037)
Age6069 0.0546** 0.0545**
(0.0035) (0.0035)
Age69+ 0.0812** 0.0810**
(0.0069) (0.0069)
Familyplan 0.0006 0.0092**
(0.0022) (0.0022)
NumberObs 479,196 479,196
Notes:Eachcolumnshowscoefficients(andstandarderrors)fromasingleOLSregression.Othercontrolvariables
includeafullsetofmunicipalityandyearfixedeffectsandcontrolsfordateofhire.Theomittedagecategoryis
<19yearsold.Standarderrorsareclusteredonmunicipality.Thesampleincludesallcontinuouslyenrolledactive
employeesoverthethreeyearperiodfromfiscalyear2010tofiscalyear2012;theunitofobservationisaperson
year.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
38
Table5HeterogeneityinFirstStage
Differenceindifference Fullvariation
BaseEstimates 0.116** 0.0070**
(0.004) (0.0002)
ByChronicIllness
NoChronicIllness 0.104** 0.0063**
(N=132,727) (0.003) (0.0002)
ChronicIllness 0.121** 0.0073**
(N=346,469) (0.004) (0.0002)
BybroadnetworkinsurancecompanyinFY2010
Fallon 0.236** 0.0139**
(N=13,695) (0.012) (0.0008)
Harvard 0.199** 0.0117**
(N=121,992) (0.007) (0.0005)
Tufts 0.109** 0.0068**
(N=169,065) (0.009) (0.0005)
Unicare 0.081** 0.0056**
(N=102,381) (0.006) (0.0007)
ByPCPsavailabilityinalimitednetwork
PCPisinthelimitednetworkplan 0.168** 0.0100**
offeredbycurrentinsurer(N=187,656) (0.006) (0.0003)
PCPisinalimitednetworkplan 0.127** 0.0077**
offeredbyadifferentinsurer (0.010) (0.0006)
(N=76,125)
PCPisnotinalimitednetworkplan 0.101** 0.0061**
(N=43,197) (0.002) (0.0002)
Notes:Eachcellshowsthecoefficient(andstandarderror)fromasingleregression.Inthefirstcolumn,the
coefficientisontheinteractionbetweenstateemployeeandpost;inthesecondcolumn,thecoefficientison
therelativepriceoflimitednetworkplans.Eachrowshowsresultsforadifferentsubsample.Controlvariables
includegender,agegroup,enrollmentinafamilyplan,dateofhire,andafullsetofmunicipalityandyearfixed
effects.CoefficientsareestimatedusingOLS.Standarderrorsareclusteredonmunicipality.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
39
Table6BasicSpendingResults
Differenceindifference FullVariation
TotalSpending 0.042* 0.0029**
(0.022) (0.0013)
OfficeVisits 0.018* 0.0012*
(0.010) (0.0006)
InpatientHospitalization 0.056 0.0048
(0.071) (0.0043)
OutpatientHospital 0.050* 0.0033**
(0.025) (0.0015)
EmergencyRoom 0.095* 0.0054*
(0.055) (0.0032)
Lab&XRay 0.083* 0.0047
(0.049) (0.0029)
Drugs 0.003 0.0003
(0.017) (0.0011)
Other 0.111** 0.0074**
(0.054) (0.0036)
Numberofobservations 479,196 479,196
Notes:Eachcellshowscoefficients(andstandarderrors)fromasingleregression.Inthefirstcolumn,the
coefficientisontheinteractionbetweenstateemployeeandpost;inthesecondcolumn,thecoefficientison
therelativepriceoflimitednetworkplans.Eachrowshowsresultsforspendingonadifferenttypeofservice.
Controlvariablesincludegender,agegroup,enrollmentinafamilyplan,dateofhire,andafullsetofmunicipality
andyearfixedeffects.Thesampleincludesallcontinuouslyenrolledactiveemployeesoverthethreeyearperiod
fromfiscalyear2010tofiscalyear2012;theunitofobservationisapersonyear.Coefficientsareestimatedusing
GLM.Standarderrorsareclusteredonmunicipality.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
40
Table7BroaderMeasuresofUtilizationforDDModel
41
Table8ResultsforOfficeVisitUtilizationbyTypeofPhysician
PrimaryCarevs.Specialistvs.Other
PrimaryCare 0.030** 0.002 0.040* 1.95
(0.015) (0.005) (0.023) (2.09)
Specialist 0.051** 0.007 0.153** 3.27
(0.013) (0.007) (0.069) (3.54)
Other 0.014 0.0001 0.027* 18.87**
(0.077) (0.0046) (0.015) (6.38)
Oldvs.NewProviders
OldProviders 0.034** 0.004 0.142** 2.27
(0.011) (0.003) (0.042) (1.83)
NewProviders 0.056** 0.016** 0.051* 7.13**
(0.013) (0.007) (0.028) (1.40)
Numberofobservations 479,196 479,196 479,196 Varies
Notes:Eachcellshowsthecoefficient(andstandarderror)ontheinteractionbetweenstateemployeeand
postfromasingledifferenceindifferenceregression.Eachrowshowsresultsforadifferenttypeofofficevisit;
eachcolumnshowsadifferentmeasureofutilizationforthatservice.Controlvariablesincludegender,agegroup,
enrollmentinafamilyplan,dateofhire,andafullsetofmunicipalityandyearfixedeffects.Thesampleincludes
allcontinuouslyenrolledactiveemployeesoverthethreeyearperiodfromfiscalyear2010tofiscalyear2012;the
unitofobservationisapersonyear.CoefficientsinthefirstcolumnareestimatedusingGLM;resultsintheother
columnsareestimatedusingOLS.Standarderrorsareclusteredonmunicipality.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
42
Table9:ImpactonDistanceTraveledandHospitalQuality
Table10a:HeterogeneityinResultsbyChronicIllness
NotChronicallyIll ChronicallyIll
Spending Visits Distance Spending Visits Distance
(GLM) (OLS) (OLS) (GLM) (OLS) (OLS)
TotalSpend 0.039* 0.043
(0.023) (0.033)
OfficeTotal 0.023** 0.066 0.137 0.013 0.349** 0.083
(0.011) (0.092) (0.183) (0.016) (0.168) (0.103)
Primary 0.022 0.060** 0.0851** 0.035* 0.006 0.474
(0.020) (0.026) (0.139) (0.018) (0.039) (0.463)
Specialist 0.053** 0.085 0.210 0.045** 0.303** 0.095
(0.015) (0.071) (0.244) (0.021) (0.143) (0.133)
Other 0.032 0.031 3.314** 0.051 0.015 1.733**
(0.103) (0.021) (0.370) (0.057) (0.035) (0.417)
Old 0.054** 0.124 0.467** 0.009 0.069 0.252
(0.021) (0.130) (0.178) (0.024) (0.182) (0.163)
New 0.037 0.046 0.566* 0.087** 0.079** 1.282**
(0.024) (0.033) (0.329) (0.009) (0.033) (0.453)
Inpatient 0.053 0.001 5.603* 0.137* 0.005 3.99*
(0.088) (0.002) (2.840) (0.073) (0.006) (2.117)
Outpatient 0.045 0.109* 1.072** 0.051 0.088 1.291**
(0.038) (0.057) (0.253) (0.034) (0.143) (0.457)
ER 0.139** 0.007 2.432** 0.016 0.012 1.151
(0.059) (0.005) (0.768) (0.061) (0.008) (0.725)
Lab 0.040 0.024* 0.159** 0.064
(0.055) (0.012) (0.065) (0.057)
Drugs 0.00003 0.250** 0.007 0.710**
(0.0282) (0.110) (0.029) (0.242)
Other 0.151* 0.049* 0.106* 0.141**
(0.077) (0.029) (0.055) (0.044)
N 346,469 346,469 Varies 132,727 132,727 Varies
Notes:Eachcellshowsthecoefficient(andstandarderror)ontheinteractionbetweenstateemployeeand
postfromasingledifferenceindifferenceregression.Eachrowshowsresultsforadifferentservice;each
columnshowsadifferentmeasureofutilizationforthatserviceforoneofthetwosubsamples.Controlvariables
includegender,agegroup,enrollmentinafamilyplan,dateofhire,andafullsetofmunicipalityandyearfixed
effects.CoefficientsinthefirstandfourthcolumnsareestimatedusingGLM;resultsintheothercolumnsare
estimatedusingOLS.Standarderrorsareclusteredonmunicipality.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
44
Table10b:HeterogeneityinResultsbyPCPsavailabilityinlimitednetworkplans
Limitednetwork,sameinsurer Limitednetwork,differentinsurer Nolimitednetwork
Spending Visits Distance Spending Visits Distance Spending Visits Distance
(GLM) (OLS) (OLS) (GLM) (OLS) (OLS) (GLM) (OLS) (OLS)
TotalSpend 0.072** 0.130** 0.047
(0.024) (0.055) (0.045)
OfficeTotal 0.012 0.199 0.119 0.047** 0.414** 0.347 0.006 0.0001 0.025
(0.015) (0.116) (0.156) (0.019) (0.192) (0.301) (0.053) (0.207) (0.569)
Primary 0.032** 0.072* 0.637* 0.046 0.068 0.225 0.053 0.018 0.789
(0.010) (0.038) (0.338) (0.036) (0.061) (0.311) (0.065) (0.075) (0.658)
Specialist 0.039* 0.196* 0.131 0.122** 0.422** 0.573 0.033 0.004 0.354
(0.021) (0.114) (0.112) (0.027) (0.185) (0.474) (0.072) (0.183) (0.615)
Other 0.204 0.066** 6.548** 0.168 0.025 0.820 0.041 0.064 0.409
(0.159) (0.029) (2.370) (0.149) (0.169) (0.717) (0.225) (0.066) (2.101)
Old 0.007 0.042 0.317 0.071** 0.118* 0.269 0.189* 0.674* 0.370
(0.017) (0.114) (0.261) (0.022) (0.067) (0.337) (0.097) (0.396) (0.569)
New 0.086** 0.081* 1.011** 0.055 0.129** 0.023 0.059 0.067 0.105
(0.025) (0.046) (0.342) (0.086) (0.053) (0.456) (0.069) (0.107) (0.480)
Inpatient 0.270** 0.001 2.547 0.097 0.006 6.720 Insufficient 0.002 7.221
(0.133) (0.005) (2.703) (0.179) (0.005) (4.044) data (0.009) (6.340)
Outpatient 0.095** 0.164* 3.152** 0.202** 0.271* 0.920* 0.171** 0.451* 0.301
(0.036) (0.086) (1.229) (0.086) (0.146) (0.481) (0.085) (0.219) (0.712)
ER 0.121 0.012 0.207 0.289** 0.030 0.875 Insufficient 0.020 0.770
(0.074) (0.008) (0.802) (0.086) (0.019) (1.983) data (0.017) (1.739)
Lab 0.110 0.051 0.134 0.028 0.019 0.011
(0.082) (0.029) (0.140) (0.028) (0.120) (0.052)
Drugs 0.021 0.223 0.002 0.602** 0.054 0.371
(0.024) (0.206) (0.056) (0.276) (0.064) (0.336)
Other 0.041 0.060* 0.174 0.050 0.190* 0.141**
(0.038) (0.032) (0.175) (0.086) (0.104) (0.055)
N 187,656 187,656 Varies 76,125 76,125 Varies 43,197 43,197 Varies
Notes:Eachcellshowsthecoefficient(andstandarderror)ontheinteractionbetweenstateemployeeandpostfromasingledifferenceindifferenceregression.Eachrow
showsresultsforadifferentservice;eachcolumnshowsadifferentmeasureofutilizationforthatserviceforoneofthreesubsamples.Controlvariablesincludegender,age
group,enrollmentinafamilyplan,dateofhire,andafullsetofmunicipalityandyearfixedeffects.Coefficientsinthefirst,fourth,andseventhcolumnsareestimatedusing
GLM;resultsintheothercolumnsareestimatedusingOLS.Standarderrorsareclusteredonmunicipality.
*denotessignificanceatthe10%level
**denotessignificanceatthe5%level
45
Table11:HeterogeneityinResultsbyDiagnosis
Meanof Effecton
Dependent Total
DiagnosticCategory Variable Spending
Infectiousandparasiticdiseases $102 0.215
(2,496) (0.181)
Neoplasms $507 0.348**
(6,294) (0.139)
Endocrine,nutritionalandmetabolicdiseases&immunitydisorders $298 0.010
(5,087) (0.100)
Diseasesofthebloodandbloodformingorgans $96 0.044
(3,407) (0.128)
Mentaldisorders $255 0.055
(2,828) (0.046)
Diseasesofthenervoussystem $237 0.208
(3,501) (0.164)
Diseasesofthesenseorgans $139 0.038
(1,141) (0.048)
Diseasesofthecirculatorysystem $484 0.036
(6,048) (0.061)
Diseasesoftherespiratorysystem $371 0.140*
(5,225) 0.077)
Diseasesofthedigestivesystem $361 0.053
(4,246) (0.096)
Diseasesofthegenitourinarysystem $379 0.013
(4,726) (0.103)
Complicationsofpregnancy,childbirth,andthepuerperium $108 Insufficient
(1,527) data
Diseasesoftheskinandsubcutaneoustissue $137 0.022
(1,840) (0.080)
Diseasesofthemusculoskeletalsystemandconnectivetissue $643 0.155**
(4,275) (0.054)
Congenitalabnormalities $66 0.065
(2,432) (0.202)
Certainconditionsoriginatingintheperinatalperiod $13 Insufficient
(544) data
Symptoms,signs,andilldefinedconditions $893 0.072
(6,775) (0.086)
46