Comments on Louise Sheiner, “The ACA Provider Cuts

Transcript:Comments on Louise Sheiner, “The ACA Provider Cuts:
Comments on Louise Sheiner, “The ACA Provider Cuts and Productivity Growth in Health Care” and Stephen Heffler, “Estimating Resource-Based Hospital Multifactor Productivity Growth” Ernst R. Berndt, MIT Sloan School of Management and NBER The Brookings Institution, Washington DC May 3, 2016 Background ACA legislation mandates that CMS’ Part A and some of Part B annual payments change by the difference between multifactor productivity growth in the health care sector minus the ten-year average of MFP growth in the overall private US economy Historically, in almost all empirical US studies, MFP and labor productivity growth in various health care sectors have been lower (and in some cases, even negative) than that in the overall private US economy. Focus of presentations by Sheiner and Heffler: (i) Is MFP growth in the US health care sector biased downward; (ii) What are the implications for implementation of the ACA payment change mandates? And (iii) what are the priorities for future policy and multifactor growth productivity research? Discussion Points Theoretical underpinnings What assumptions are made going from theory to empirical implementation? Conventional Jorgenson-Griliches-Christensen growth accounting Econometric/parametric estimates Which assumptions are particularly problematic in US health care? All inputs variable, marginal revenue products equal marginal input costs Constant returns to scale, no labor or capital fixed inputs No market power by providers, so zero economic profits No principal-agent problems, asymmetric information, moral hazard, i.e. the traditional neoclassical model of consumer (whoever that is in health care) behavior maximizing utility subject to input prices and income constraints, is applicable Priorities for future research agendas Theoretical Underpinnings for MFP Relationship among primal MFP growth ƐFt, dual MFP growth ƐCt and returns to scale Ɛ-1CY where Y = F(X,t) and C = G(Y, px, t) is ƐCt = - Ɛ-1CY ƐFt Hence dual MFP growth = negative the product of returns to scale times primal MFP growth. Note that if we assume constant returns to scale, this reduces to: ƐCt = - ƐFt Empirical Implementation for Measuring ƐFt Conventional procedure to obtain measure of Y is to deflate nominal output for ith health care sector PiYi by Pi , where Pi is the producer price index for the ith health care sector, i.e., Yi ≡ PiYi /Pi . Note: This assume constant returns to scale (CRTS), no margins and zero economic profits, and all inputs are variable and adjust instantaneously to price and output changes. Alternative discrete approximations to