Three essays on the impact of cost containment policies on the supply and demand of health care services on health outcomes

Chapter 1: Stark Contrasts (The Impact of Prohibiting Self-Referrals on Physician Prescribing Behavior). Do physicians invest in medical service facilities to profit from the overtreatment of patients? Current literature only shows that physicians with a financial interest in an entity to which they refer patients order more services than physicians without such a financial interest. These studies, however, do not prove that the additional services constitute "overtreatment." Using medical claims data from Taiwan, I examine the impact of a policy designed to remove physicians' financial incentives to overprescribe drugs by prohibiting clinic-pharmacy integration, and make three principal findings: (1) Physicians in clinics that are vertically integrated with a pharmacy overtreat patients with prescription drugs. (2) Removing the incentives to overprescribe drugs causes physicians to overprescribe diagnostic and laboratory tests instead (3) This overtreatment occurs even when physicians refer patients to an employee-pharmacist in the clinic rather than to an outside entity in which physicians have a financial interest. These findings have important implications for federal Stark Legislation (42 U.S.C.S.§1395nn), which prohibits physicians' referral of Medicare/Medicaid patients to an entity in which they have a "financial relationship" for certain designated health services. In particular, the third finding calls into question Stark Law's implicit assumption that vertically integrated medical providers are unlikely to overtreat patients, as exemplified by the "bona fide employee" safe harbor exception.;Chapter 2: Strategic Response to Outpatient Prescription Drug Cost-Sharing. Rising health care costs have spurred insurers to implement numerous cost-containment policies, including demand-side cost-sharing such as outpatient prescription drug copayment programs. Most empirical studies agree that higher cost-sharing generally leads to a reduction in health care utilization, but few have looked at strategic patient behavior in response to the imposition of prescription drug copayments. In this paper, I show that cost-sharing, generally implemented to combat moral hazard, could paradoxically increase drug expenditures due to the distorting effects of the policy. In particular, faced with a cost-sharing program that imposes out-of-pocket expenses based on total drug expenditures per-visit and subject to a maximum cap (on cost-sharing), diabetic and hypertensive patients reduced the number of office visits but increased per-visit drug expenditures. Moreover, not all chronically ill patients selectively increase expenditures associated with "essential drugs" rather than "less essential drugs." The results of this study demonstrate that some cost-sharing policies may create distortions that outweigh their theoretical benefits, and that patients are not always able to evaluate which drugs are essential to treat their underlying conditions.;Chapter 3: Penny Wise and Pound Foolish? The Impact of Outpatient Prescription Drug Cost-Sharing on Compliance and Health Status. Patient cost-sharing has been justified for its ability to reduce perceived overutilization of health care services. Most empirical studies show that even modest increases in outpatient prescription drug cost-sharing may result in reduced drug utilization. However, few studies convincingly link prescription drug cost-sharing, compliance, and patient health outcomes due to methodological challenges or outdated institutional and medical settings. In this paper, I show that there is no uniform answer to this crucial question: While diabetic patients remain compliant after the cost-sharing policy and do not show any change in health status (as captured by subsequent utilization of inpatient and emergency care services), hypertensive patients become nonadherent for two antihypertensive medications and experience adverse health outcomes. The results demonstrate that it is difficult to draw generalizations about the impact of cost-sharing on compliance and health, and that policy implementations may need to be decided on a finer classification of diseases and conditions.