Health Care Spending Zack Cooper Yale University Amanda Kowalski Yale University and NBER Eleanor Neff Powell University of Wisconsin Jennifer Wu Yale University Princeton University Center for Health and Wellbeing Seminar ID: 657738
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Slide1
Politics, Hospital Behavior, and Health Care Spending
Zack Cooper, Yale UniversityAmanda Kowalski, Yale University and NBEREleanor Neff Powell, University of WisconsinJennifer Wu, Yale UniversityPrinceton UniversityCenter for Health and Wellbeing SeminarSeptember 18, 2017Slide2
US Congress Can Influence US Health SpendingFederal government share: 29%1
Source: CMS National Health Expenditure Data, 2017National Health Expenditure by Source of Payment, 2015Total: $3.2 trillionSlide3
Health Care is the Most Heavily Lobbied Industry in the US2Source: opensecrets.org, 2017
Lobbying Dollars by Industry, 2016Slide4
Our Focus: Medicare Modernization Act of 2003Strong political priority for President George Bush:“George W. Bush strongly supported this effort [to pass Part D]. Looking ahead to a close re-election in 2004, he thought a new government giveaway to the elderly would increase his vote share among this group. According to exit polls, those over age 65 gave Mr. Bush only 47 percent of their vote in 2000, with 51 percent going to Al Gore
.”- Bruce Bartlett, The New York Times, 11/19/20133Slide5
Passing the MMA was Difficult“I've been in politics for 22 years and it was the ugliest night I have ever seen in 22 years.”
- Walter Jones, R-N.C.4Slide6
“… narrower provisions tailored to benefit special interests. Such measures, dubbed ‘rifle shots’ for their narrowly targeted effects, are commonly attached to complex, high-profile legislation in the crunch as a way to both build support for the larger bill.”- Lee, The Washington Post, 2003
5Leadership introduced “sweeteners” to help passageSlide7
Section 508
Section 508. One-Time Appeals Process for Hospital Wage Index Classification(a) ESTABLISHMENT OF PROCESS. - (1) In General. – The Secretary shall establish not later than January 1, 2004, by instruction or otherwise a process under which a hospital may appeal the wage index classification otherwise applicable to the hospital and select another area within the State (or, at the discretion of the Secretary, within a contiguous State) to which to be reclassified. (c) QUALIFYING HOSPITAL DEFINED.- For purposes of this section, the term “qualifying hospital” means a subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 1395ww(d)(1)(B)) that- (1) does not qualify for a change in wage index classification under paragraph (8) or (10) of section 1886(d) of the Social Security Act on the basis of requirements relating to distance or commuting; and (2) meets other criteria, such as quality, as the Secretary may specify by instruction or otherwise. (e) LIMITATION OF EXPENDITURES.- The aggregate amount of additional expenditures resulting from the application of this section shall not exceed $900,000,000. - Section 508 of P.L. 108 – 173: Medicare Prescription Drug Improvement, and Modernization Act of 2003 6Slide8
Hospitals Reclassified over Long Distances7
United Regional Health Care System in Wichita Falls, TX received at 508 Waiver. It was reclassified into the same area as McAllen Medical CenterSlide9
ContributionsPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District [Evans, 2004
]8Slide10
ContributionsPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District [Evans, 2004]
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New Technology [Duggan, 2000; Dafny, 2005; Kaestner and Guardado, 2008; Baicker and Staiger, 2005; Wu and Shen, 2014]9
Activity and Prices
Staffing
Equipment and Quality
Total Discharges
(+)
Payroll
(+)
Saidin
Technology Index
(+)
Medicare Discharges
(+)
Total FTE
AMI Mortality
Rate
Medicaid Discharges
(+)
FTE Doctors
Length of Stay for AMI
Hospital Private Price
FTE Registered Nurses
(+)
County Hires in Health Sector
(+)
Hospital CEO Salary
(+)Slide11
ContributionsPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District [Evans, 2004]
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New Technology [Duggan, 2000; Dafny, 2005; Kaestner and Guardado, 2008; Baicker and Staiger, 2005; Wu and Shen, 2014
]
Health Care Spending
-
Increased Spending
10Slide12
ContributionsPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District [Evans, 2004]
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New Technology [Duggan, 2000; Dafny, 2005; Kaestner and Guardado, 2008; Baicker and Staiger, 2005; Wu and Shen, 2014
]
Health Care Spending
-
Increased Spending
More Politics
- Increased Donations
[
Levitt and Snyder, 1997;
Rocca
and Gordon, 2013]
11Slide13
The PlanPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
[Evans, 2004]Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New Technology [Duggan, 2000; Dafny, 2005; Kaestner and Guardado, 2008; Baicker and Staiger, 2005; Wu and Shen, 2014]Health Care Spending
- Increased Spending
More Politics
- Increased Donations
[Levitt and Snyder, 1997; Rocca and Gordon, 2013]
12Slide14
Roll Call Vote 332The key vote that moved the bill from the House to the Senate
Section 508 added immediately after this vote13Yea (For)Nay (Against)Number of Votes
216
215
Democrats
9
195
Republicans
207
19
Roll call vote 332 resultsSlide15
Roll Call Vote 33214Source: Smith, Roberts, and
Wielen, 2011HouseSenateRoll call vote 332508 Language InsertedSlide16
Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Voted Yea(1)Voted Nay(2)Yea – Nay(3)All Hospitals0.035
0.025
0.010+
Eligible Hospitals
0.059
0.042
0.017+
15
+
p<0.1, *p<0.5, **p<0.01. Votes are based on roll call vote 332. Eligible
hospitals were those that did not have an existing wage index adjustment
Probability of Receiving a Section 508 Waiver by Congressional Votes for MMASlide17
Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Voted Yea(1)Voted Nay(2)Yea – Nay(3)All Hospitals0.035
0.025
0.010+
Eligible Hospitals
0.059
0.042
0.017+
All Hospitals,
Represented by Republicans
0.033
0.005
0.028**
Eligible Hospitals,
Represented by Republicans
0.056
0.008
0.048**
All Hospitals,
Represented by Democrats
0.070
0.027
0.042+
Eligible Hospitals,
Represented by Democrats
0.110
0.046
0.064+
16
+
p<0.1, *p<0.5, **p<0.01. Votes are based on roll call vote 332.
Eligible hospitals were those that did not have an existing wage index adjustment
Probability of Receiving a Section 508 Waiver by Congressional Votes for MMASlide18
Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Voted Yea(1)Voted Nay(2)Yea – Nay(3)Hospitals Receiving 508 Waiver396.89
361.03
35.86
Hospitals Receiving 508 Waiver,
Represented
by Republicans
392.41
0.00
392.41**
Hospitals Receiving 508 Waiver,
Represented
by Democrats
511.14
354.47
156.67**
17
+
p<0.1, *p<0.5, **p<0.01. Votes are based on roll call vote 332. Values in Dollars.
Size of PPS Payment by Congressional Votes for MMASlide19
The PlanPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New TechnologyHealth Care Spending - Increased SpendingMore Politics - Increased Donations
18Slide20
Section 508 Increased Payments to Hospitals19
The Effect of a 508 Waiver on Hospital PPS Payment RatesWe plot the annual hospital base payment rate for hospitals receiving 508 waivers with and without the wage index change. The base payment rate reflects the amount a hospital is paid by CMS for delivering a case of average complexity.Hospital Base Payment Rate ($)Slide21
Section 508 Increased Payments to Hospitals20Quantity-Fixed 2005 Revenue Gains from the Section 508 ProgramGains are calculated by taking the difference in revenue using the 2005 PPS payment rates with and without the Section 508 Waiver at each hospital. We fix the quantity of cases delivered at each hospital.
Revenue Gains($ Millions)Revenue Gains(% Revenue)(1)
Mean
(2)
Min
(3)
Max
(4)
Mean
(5)
Min
(6)
Max
High
508 Recipients
(29 Hospitals)
7.66
3.42
26.61
10.06
7.97
15.44
Med 508 Recipients
(29 Hospitals)
2.37
1.34
3.41
6.44
5.74
7.96
Low 508 Recipients
(30 Hospitals)
0.59
0.04
1.27
3.5
0.47
5.41
Total Number
of 508 Hospitals
88
88Slide22
The PlanPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New TechnologyHealth Care Spending - Increased SpendingMore Politics - Increased Donations [Levitt and Snyder, 1997; Rocca and Gordon, 2013]21Slide23
Hospitals in Our AnalysisHigh 508 Recipient
Hospitals with largest potential exposure to 508 program29 HospitalsControl (1)Hospitals eligible for a 508
but that did not apply
1,278 Hospitals
Control (2)
Hospitals ineligible
for a 508
1,125 Hospitals
Control (3)
Hospitals that applied for a 508
but were rejected
284 Hospitals
Total Hospitals
2,275 Hospitals
22
Eligible hospitals were those that did not have an existing wage index adjustment. Ineligible hospitals were those that
had
a wage index adjustment. Slide24
Hospital Behavior: Increased ActivityActivity and Prices
StaffingEquipment and QualityTotal DischargesPayrollSaidin Technology IndexMedicare DischargesTotal FTE
AMI Mortality
Rate
Medicaid Discharges
FTE Doctors
Length of Stay for AMI
Hospital Private Price
FTE Registered Nurses
County Hires in Health Sector
Hospital CEO Salary
23
Dependent
VariablesSlide25
Hospital Behavior: Increased Activity24Activity and Prices
StaffingEquipment and QualityTotal DischargesPayrollSaidin Technology IndexMedicare Discharges
Total FTE
AMI Mortality
Rate
Medicaid Discharges
FTE Doctors
Length of Stay for AMI
Hospital Private Price
FTE Registered Nurses
County Hires in Health Sector
Hospital CEO Salary
Dependent
VariablesSlide26
25
Hospital Behavior: Increased ActivityA 508 waiver led to an increase in total discharges of 978 in 2005 and 1,577* per year from 2006-2010, on a base of 19,519 total 2004 discharges for hospitals that would receive a waiver.
+p<0.10, *p<0.05, **p<0.01
Adjusted by hospital and year fixed effects normalized to 2004
. Standard errors clustered by
hospital.Slide27
26
Hospital Behavior: Increased ActivityAdjusted by hospital and year fixed effects normalized to 2004.Slide28
Hospital Behavior: Increased Activity
Total Discharges(1)Medicare Discharges(2)Medicaid Discharges(3)Private Price(4)High 508 Recipient * 2005978
500+
264*
91.28
High 508 Recipient
* 2006-10
1577*
953*
457*
322.50
Mean Dependent Variable in 2004
High
508 Recipient Hospitals
19,519
8,728
2,790
8,089.67
Control Hospitals
10,586
4,258
1,937
6,842.24
27
+p<0.10, *p<0.05, **p<0.01. Adjusted by hospital and year fixed
effects.
Standard errors clustered by
hospital.Slide29
Hospital Behavior: Increased Hiring and CEO Pay28Activity and Prices
StaffingEquipment and QualityTotal DischargesPayrollSaidin Technology IndexMedicare Discharges
Total FTE
AMI Mortality
Rate
Medicaid Discharges
FTE Doctors
Length of Stay for AMI
Hospital Private Price
FTE Registered Nurses
County Hires in Health Sector
Hospital CEO Salary
Dependent
VariablesSlide30
29Hospital Behavior: Increased Hiring and CEO PayAdjusted by hospital and year fixed effects normalized to 2004.Slide31
30Hospital Behavior: Increased Hiring and CEO PayA 508 waiver led to an increase in health sector county hires of 378+ in 2005
and 20 per year from 2006-2010, on a base of 2,013 hires in 2004 for hospitals that would receive a waiver.+p<0.10, *p<0.05, **p<0.01Adjusted by county and year fixed effects normalized to 2004. Standard errors clustered by countySlide32
31Hospital Behavior: Increased Hiring and CEO PayA 508 waiver led to an increase in health sector county hires of
378+ in 2005 and 20 per year from 2006-2010, on a base of 2,013 hires in 2004 for hospitals that would receive a waiver.+p<0.10, *p<0.05, **p<0.01Adjusted by county and year fixed effects normalized to 2004. Standard errors clustered by county.378 x $50,000 = $18.9 million≈ $16 million increase in PayrollSlide33
32Hospital Behavior: Increased Hiring and CEO PayAdjusted by hospital and year fixed effects normalized to 2004. Standard errors clustered by hospital.
A 508 waiver led to an increase in CEO salary of $45.51k in 2005 and $427.56k+ per year from 2006-2010, on a base of $528.42k in 2004 for hospitals that would receive a waiver.+p<0.10, *p<0.05, **p<0.01Slide34
Hospital Behavior: Increased Hiring and CEO Pay
Payroll($ Mil.)(1)Total FTE(2)FTE MD(3)FTENurses(4)
CountyHires
(5)
CEO
Salary
($
Thous
.)
(6)
High 508 Recipient
* 2005
15.98+
27
5
66*
378+
45.51
High 508 Recipient
*2006-10
48.91*
233
59
110+
20
427.56+
Mean Dependent Variable in 2004
High 508 Recipient
Hospitals
134.60
2,589
197
707
2,013
528.42
Control Hospitals
58.45
1,199
47
345
1,072
312.48
33
+p<0.10, *p<0.05, **p<0.01
.
Adjusted by hospital and year fixed
effects.
Standard errors clustered
by hospital. Column (5) is adjusted by county and year fixed effects, with standard errors clustered by county.Slide35
Hospital Behavior: Increased Investment in Technology34Activity and Prices
StaffingEquipment and QualityTotal DischargesPayrollSaidin Technology IndexMedicare Discharges
Total FTE
AMI Mortality
Rate
Medicaid Discharges
FTE Doctors
Length of Stay for AMI
Hospital Private Price
FTE Registered Nurses
County Hires in Health Sector
Hospital CEO Salary
Dependent
VariablesSlide36
35Hospital Behavior: Increased Investment in TechnologyThe Saidin Index captures the number of rare technologies available at each hospital. 1-unit increase = add 1 unique technology
= add 2 technologies possessed by half of hospitalsAdjusted by hospital and year fixed effects normalized to 2004. Standard errors clustered by hospital.95% Confidence IntervalsShort run: (-0.008, 0.020)Long run: (-0.011, 0.007)95% Confidence IntervalsShort run: (-0.185 to 0.211)Long run: (-0.181 to 0.248)Slide37
Hospital Behavior: Increased Investment in Technology
Saidin Tech. Index(1)30-Day AMI Mortality(2)AMI Length of Stay(3)High 508 Recipient * 2005
2.1248**
0.0062
0.0133
High 508 Recipient
*2006-10
4.1584**
-0.0020
0.0338
Mean Dependent Variable
in 2004
High 508
Recipient Hospitals
7.41
0.11
5.74
Control Hospitals
4.11
0.13
5.28
36
+p<0.10, *p<0.05, **p<0.01. Adjusted by hospital and year fixed
effects.
Standard errors clustered by
hospital.Slide38
The PlanPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New TechnologyHealth Care Spending - Increased SpendingMore Politics - Increased Donations37Slide39
38Increased Health Care SpendingA 508 waiver led to an increase in hospital spending of $103.40m** in 2005 and $228.60m**
per year from 2006-2010, on a base of $795.95m in 2004 for hospitals that would receive a waiver. This amounts to more than a $1.25 billion increase overall. +p<0.10, *p<0.05, **p<0.01. + Payments → + Investment in Technology → + Activity → + Investment → + SpendingAdjusted by hospital and year fixed effects normalized to 2004. Standard errors clustered by hospital.Slide40
The PlanPolitics - Section 508 Increased Payments to Hospitals - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Hospital Behavior - Increased Activity, Staffing, CEO Pay, and Investment in New TechnologyHealth Care Spending - Increased SpendingMore Politics - Increased Donations39Slide41
Extending the 508 Program was a political opportunity“In light of todays [sic] announcement that Senate leaders will pursue an extension of Section 508 of the Medicare Modernization Act, US Senator Charles E. Schumer, a member of the Senate Finance Committee, pledged today to work to include all New York Section 508 hospitals…”
- Office of Senator Charles Schumer, 200640Slide42
41Source: opensecrets.orgHospitals Organized Coalition to Extend the 508 ProgramSlide43
42Politicians were Rewarded for Bringing Benefits Home
Adjusted by district and year fixed effects normalized to 2003/4 election cycle.Slide44
Politicians were Rewarded for Bringing Benefits Home
All DonorsAll Donors,Health SectorAll Donors,Same StateAll Donors,
Health Sector and Same State
(1)
(2)
(3)
(4)
High 508 Recipient District *
2001/2 Election Cycle
0.00
-0.15
-0.04
0.25
High 508 Recipient District *
2005/6 Election Cycle
0.22*
0.13
0.19
0.14
High 508 Recipient District *
2007/8 Election Cycle
0.08
0.48**
-0.05
0.65**
High 508 Recipient District *
2009/10 Election Cycle
0.16
0.03
-0.16
0.58
Mean Dependent Variable in 2003/4
Election Cycle
High 508 Recipient
Hospitals
1,173.64
64.70
472.30
25.00
Control Hospitals
1,084.10
74.90
430.70
34.70
43
+p<0.10, *p<0.05, **p<0.01
. Adjusted by district and year fixed effects normalized to 2003/4 election cycle.
Standard errors clustered by district. All values are logged, excluding 0-valued donations. Slide45
Key Take Away PointsPolitics - Voting ‘Yea’ Increased the Probability of Bringing Benefits to the District
Hospital Behavior - Section 508 Increased Payments to Hospitals - Increased Activity, Staffing, CEO Pay, and Investment in New TechnologyHealth Care Spending - Increased SpendingMore Politics - Increased Donations44Slide46
The Big Picture: Politics, Hospital Behavior, Health Care SpendingEveryone Wins (Almost!)Seniors get prescription drug coverageHospitals receive higher payments
Increased ActivityMore jobsHigher Pay for CEO’sBetter technologyPoliticians see more in donationsTaxpayers pay the billWhat Drives Health Spending?TechnologyProvider PreferencesPatient HealthPolitics45Slide47
The Big Picture: Politics, Hospital Behavior, Health Care Spending“In the past, decisions on health care delivery were largely professional ones. Now the decisions will be largely political
.”- John G. Veneman, undersecretary of the Department of Health, Education and Welfare (HEW) in the Nixon administration, quoted in Inglehart (1971) as cited in Starr (1983) 46