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AHRQ Annual Report on Research and Management, FY 2002

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Goal 3—Costs, Use, and Access to Health Care

Addressing Challenges to Care

The United States spends a larger share of its gross domestic product on health care than any other major industrialized country. Although the rate of growth in health care costs slowed somewhat in the mid-1990s, costs are once again on the rise at a rate that exceeds other sectors of the economy.

In 2000, for example, the average annual health insurance premium in the private sector increased to $2,655 for single coverage and $6,772 for family coverage, an increase of 33.3 percent and 36.7 percent, respectively, above the costs in 1996, according to data from AHRQ's Medical Expenditure Panel Survey (MEPS). Americans are concerned about increased out-of-pocket health care costs, higher health insurance premiums, and rising prescription drug prices. Thus, identifying ways to contain health care costs and obtain high value for our health care investments continues to be a priority for the Nation, particularly for policymakers and public and private payers.

In addition to concerns about costs, many Americans experience problems accessing care when they need it. This is particularly true for the poor, the uninsured, members of minority groups, rural residents, and other priority populations. At the same time, examples of inappropriate care, including overuse and misuse of services, continue to be documented.

All players in the health care system—employers, insurers, providers, and consumers, as well as Federal and State policymakers—need objective, science-based information they can rely on to help them make critical decisions about health care costs and financing and ways to enhance access to care. For more than 10 years, AHRQ has been working to meet this need. AHRQ addresses critical health policy issues through ongoing development of nationally representative and specialized databases, the production of public use data products, and research and analyses conducted by AHRQ staff and outside researchers.

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Impact of Payment and Organization on Cost, Quality, and Equity

Health care in the United States is provided by large systems, with complex funding streams. Before we can improve the quality and efficiency of health care, providers, purchasers, and policymakers need more information about how these systems operate and how different financial and organizational arrangements affect health care. AHRQ's FY 2002 research grant portfolio addressed these issues by asking questions such as:

  1. How do different payment mechanisms and financial incentives affect quality, access, and the cost of care?
  2. How can payment arrangements be designed to provide appropriate incentives to both patients and providers and enhance patient knowledge of and compliance with treatment regimens?
  3. How does consumer and patient decisionmaking influence payment policies?
  4. How do different patterns and levels of market competition affect the quality and cost of care?
  5. What is the impact of employer and coalition efforts on the quality and cost-effectiveness of care in the marketplace, the impact of State efforts to monitor and improve access and quality, and the impact of public and private payment changes on the health care safety net?
  6. What organizational structures and processes are most likely to sustain high quality, efficient health care?

AHRQ Research Focus on Health Care Costs

Health care costs and the allocation of scarce health resources have been a focus of AHRQ research for more than 10 years. All players in the health care system—employers insurers, clinicians, and consumers, as well as Federal and State policymakers—need objective, science based information to help them make critical decisions that involve health care costs.

For example, AHRQ-supported research has:

  • Demonstrated the cost-effectiveness of self-management programs for people with chronic diseases.
  • Identified steps employers can take to lower their costs for health insurance.
  • Examined the effects of competition among HMOS on health insurance premiums.
  • Analyzed the cost consequences of a variety of policy choices, such as prescription formularies, prior authorizations programs, and physician and organizational incentives.

AHRQ developed a Program Announcement on the effects of payment and organizational structures and processes on the cost, quality, and equity of health care. Important areas to be addressed by this research include: the effects of different payment mechanisms and financial incentives on health care quality, costs, and access; the impact of purchaser and public-sector initiatives on quality, costs, and access to care and to health insurance; the organizational structures most likely to sustain high-quality, accessible health care; and the impact of different patterns and levels of market competition on health care quality and costs.

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Health Care Markets and Managed Care

From a growing body of social science evidence we are learning that market dynamics and delivery system organization are critical determinants of patients' access, quality of care, and outcomes, as well as costs. Over the last few years, AHRQ's research portfolio has emphasized two areas of inquiry, each focusing on particular patient populations:

  1. Which features of managed care improve the quality of care provided to patients with chronic conditions?
  2. What public insurance program policies and practices improve access to care and quality of care for low-income children?

These areas of inquiry were selected in direct response to the need for information about key market and delivery system determinants. Decisionmakers need to know how deliberate or unintended changes in system determinants affect care provided to low-income children and people with chronic illnesses. In addition to these two priority areas, AHRQ has supported a broader portfolio related to marketplace complexities and delivery system organization.

Costs for Mental Health Services

A study led by an AHRQ researcher found that using a managed care "carve-out" arrangement to provide equal coverage for mental health services did not raise costs for one large employer. Carve-outs are services provided within a standard health benefit package but delivered and managed by a separate organization. The researchers compared plan costs, use patterns, and access in the year prior to the changes with the 3 years following the changes.

Although the number of people treated increased nearly 50 percent, the costs to the plan for mental health services declined by almost 40 percent over the 4-year study period. Most of this decline was due to reducing lengths of stay for inpatient mental health treatment. Managed care did not limit access to outpatient treatment.

To gather evidence on how best to provide care to the millions of Americans with chronic conditions, AHRQ teamed with the American Association of Health Plans Foundation and AHRQ's sister agency, the Health Resources and Services Administration (HRSA) in 1998. Findings from this initiative are now emerging, including:

  • The choice of compensation method used by independent practice associations (IPAs) and health maintenance organizations (HMOs) to pay physicians has an impact on quality of care. In a study of over 50 group practices, IPA/HMO payment formulas that capitated ophthalmology group practices and provided bonuses to individual physicians were associated with lower satisfaction ratings among patients with diabetic retinopathy and open-angle glaucoma—two leading causes of blindness— than fee-for-service payment formulas.
  • IPA networks consistently had worse process and outcome quality indicators for patients with chronic heart and lung diseases than more tightly managed medical groups.

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Research on Lowering Health Care Costs

AHRQ-funded research provides essential information to help reduce health care costs to consumers, to employers who sponsor insurance coverage, and especially to the Medicare and Medicaid programs. Examples of findings from recent AHRQ research on lowering health care costs include:

  • Employers may lower their costs for health insurance. The amount of cost-sharing an employer requires, as well as the number of plans the employer offers to employees, can significantly affect the employer's health care costs. This study found that employers may be able to lower their health insurance costs by offering their employees three or more health plans and making fixed-dollar contributions to each, thus making employees more price sensitive.
  • Effects of competition among HMOs. More competition among HMOs may mean lower prices for consumers, according to this study. Researchers compared data on HMO premiums in various markets and found that premiums were lower in more competitive markets, where a high percentage of the population was enrolled in HMOs and HMOs competed for their business.
  • Self-management programs for people with chronic diseases. About 70 percent of all health care expenditures are related to chronic disease. According to this study, patients with chronic diseases who participated in a brief self-management training program improved their health or had less deterioration and used fewer health care services over a 2-year period, compared with their status before the program. The program led to savings of $590 per participant over a 2-year period, due to fewer hospital days and outpatient visits.
  • Treating middle ear infection in children. Middle ear infection is the most frequent reason for prescribing antibiotics. In Colorado, low-cost antibiotics accounted for 21 percent of antibiotic expenditures for the condition, while high-cost antibiotics accounted for 76 percent of expenditures. A recent AHRQ study demonstrated that less costly antibiotics are just as effective as high-cost antibiotics in treating middle ear infection in children and that use of the less expensive antibiotics could have saved nearly $400,000 in Medicaid expenditures for the State of Colorado.

Costs and Outcomes in Dialysis Patients

Increasing comorbidity among patients with end-stage renal disease (ESRD)—for example, diabetes or other serious illness—may profoundly impact illness severity, risk of death, resource use, and overall health care costs in the dialysis population. Researchers at the University of Utah are developing a comorbidity tool to help clinicians identify high-risk patients and select the optimal dialysis modality early in treatment.

This will be of particular interest to the Medicare ESRD program, since most dialysis patients are aged 60 or older and have one or more comorbid conditions. The primary outcomes of interest will be hospital days and Medicare hospital costs.

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Current Research on Health Care Costs

AHRQ has many ongoing projects focused on health care costs, cost-effectiveness, and financing, including private insurance, Medicare, Medicaid, and lack of insurance. Examples of projects currently underway include:

  • Safety and financial implications of ED copayments. Copayments are a commonly used patient-level incentive for modulating the demand for services and the use of unnecessary care. Although we know that copayments and other forms of cost-sharing can lead to reduced use of services, we do not know what effects these incentives have on patient outcomes. These investigators are evaluating the effects of different copayment levels on emergency department use, treatment costs, and patient outcomes within the Kaiser Permanente-Northern California health system. The main outcomes of interest are hospital admissions, ICU admissions, mortality, and treatment costs.
  • Impact of payment policies on the cost, content, and quality of care. These researchers are combining data from health plans to examine how economic incentives inherent in the relationship between health plans and providers (physicians and hospitals) influence cost, quality, and type of services received by patients.
  • Reduced use of prescribed medicines among Medicare beneficiaries. This study is assessing the impact of out-of-pocket costs incurred by Medicare+Choice beneficiaries on their use of prescription medicines.
  • Impact of patient-centered care on health care costs. These researchers are examining the relationship between the provision of patient-centered care and health care costs, health status, and satisfaction. Patient-centered care is characterized by incorporating the patient's experience of illness and psychosocial context into shared physician-patient decisionmaking. Other goals include characterizing the features of patient-physician communication that contribute to lower health care costs and identifying modifiable factors in physician interaction styles that can lead to decreased use of services, lower costs, and recognition of patient emotional stress.

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Enhancing Access to Care

Adequate access to health care services continues to be a problem for many Americans, particularly poor people, those who are uninsured, minorities, residents of rural areas, and other vulnerable groups. Also, continuing changes in the organization and financing of care have raised new questions about access to a range of health services, including emergency and specialty care.

Enhancing access to health care services is a priority for AHRQ researchers. Examples of current research on health care access include:

  • Access to HIV Care in the United States. These researchers are examining the factors that contribute to disparities in access to care for HIV across demographic subgroups and how access to new, more effective HIV therapies has changed over time. They also are examining outcomes of HIV therapy and whether access affects health-related quality of life, symptoms, disease progression, and 3-year mortality.
  • Clinical Outcomes of Asthma for Children. Improving care for children with asthma is a national priority, and certain children—minorities, those who live in urban settings, and those who are poor—are at increased risk of adverse outcomes. These researchers are assessing the effects of lack of access to health care on improvements in clinical outcomes for children enrolled in Tennessee's Medicaid program. Outcome measures are ER visits and hospitalization for asthma. Their evaluation will increase understanding of how threats to health care access (e.g., gaps in Medicaid enrollment) potentially influence clinical outcomes in high-risk groups of children.
  • Urban/Rural Differences in Use of Long-term Care. These researchers are examining how community resources influence access to long-term care, including institutional care and community and home-based care. Elders with disabilities overwhelmingly prefer their own home to an institutional site of care, and home and community-based services have expanded in recent years to meet their needs. However, some elderly people are less likely to have access to home and community-based care, particularly elders living in rural areas. The researchers are using 1999-2001 data from Michigan nursing homes and home-based care programs to describe urban/rural differences in demographic and need characteristics of long-term care users.
  • Retention of Physicians in Rural Areas. These researchers are examining data from a longitudinal survey of rural primary care physicians to describe the length of time the physicians spend in practice in areas identified as Health Profession Shortage Areas (HPSAs). They are identifying personal, practice, and community factors associated with longer retention. In addition, they will test their hypothesis that community assimilation is predictive of retention.

Recent findings from AHRQ-sponsored research on health care access include:

  • Effects of Lack of English Ability on Hispanic Children's Access to Care. The disadvantage that some Hispanic children experience in their access to health care may be related to their parents' inability to speak English well enough to interact fully with the health care system, according to a recent study conducted by AHRQ researchers. They found that black and Hispanic children are at a substantial disadvantage compared with white children, even after accounting for health insurance and socioeconomic status. However, when their parents' ability to speak English is comparable, the differences between Hispanic and white children nearly disappear. These findings suggest that problems in accessing care for Hispanic children may be related to language ability and having parents whose English skills and understanding of the health care system are limited.
  • Access to Care for Asians/Pacific Islanders. A recent AHRQ study found that Asians and Pacific Islanders who live on the West Coast have worse access to care than whites or any other ethnic group. This finding is surprising, since Asians had a higher proportion of high-income and well-educated individuals than other groups in the study. These access problems may be due to cultural differences and communication problems, according to the UCLA researchers who conducted the study. They surveyed demographics and access to care for patients receiving managed health care from 48 physician groups in California and five other States (Washington, Oregon, Texas, Arizona, and New Jersey).
  • Effects of SCHIP Reenrollment Policies on Children's Access to Care. AHRQ's research indicates that as many as 11 million U.S. children ages birth to 18 are uninsured. Obtaining adequate access to care and maintaining a usual source of care are challenging for these children and their families. SCHIP (State Children's Health Insurance Program) ensures that uninsured children have access to care. Parents must periodically reenroll their children in SCHIP. Kansas, New York, and Oregon have active SCHIP reenrollment policies requiring parents to verify their children's eligibility. Florida, on the other hand, has a passive policy that requires parental notification only if changes occur that affect a child's eligibility for coverage. According to this study, at reenrollment only 5 percent of children in Florida's SCHIP were disenrolled compared with one-third to one-half of children enrolled in SCHIP in other States.

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Medical Expenditure Panel Survey

AHRQ's Medical Expenditure Panel Survey (MEPS) provides a wealth of information on how Americans use and pay for health care. In addition to the core survey of households, MEPS also includes surveys of medical providers and establishments to supplement the data provided by household respondents on medical expenditures and health insurance coverage.

MEPS collects detailed information on health care use, expenditures, sources of payment, and insurance coverage for a representative sample of the U.S. civilian noninstitutionalized population. Since 1977, AHRQ's expenditure surveys have been an important and unique resource for public and private-sector decisionmakers. No other surveys supported by the Federal Government or the private sector provide this level of detail regarding: health care services used by Americans at the household level and their associated expenditures (for families and individuals); the cost, scope, and breadth of private health insurance coverage held by and available to the U.S. population; and the specific services purchased through out-of-pocket and/or third-party payments.

A new questionnaire was incorporated into MEPS beginning in 2000. Questions were taken from AHRQ's CAHPS® , a research-based, validated survey tool that assesses people's experiences with their own health plans. Respondents were asked about the timeliness with which they received urgent and routine medical care, as well as their experiences during care. For example, responses indicate that among those aged 18 to 64, people without insurance were more likely than those with coverage to report sometimes or never receiving urgent care as soon as they wanted. These new measures will be included in the National Healthcare Quality Report, first due out in 2003, which will provide information to policymakers, providers, and consumers to monitor the Nation's progress toward improved health care quality.

MEPS Data Are Comprehensive and Widely Used and Quoted

Recently, the National Academy of Science's prestigious Institute of Medicine drew heavily on MEPS data in formulating its new report on health insurance and families. A senior researcher from AHRQ's Center for Cost and Financing Studies served as a formal reviewer for the report.

According to the IOM, MEPS provides the most comprehensive data on who uses what health care service and how much is paid for that service.

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Collecting MEPS Data

AHRQ fields a new MEPS panel each year. Two calendar years of information are collected from each household in a series of five rounds of data collection over a 2-1/2 year period. These data are linked with additional information collected from the respondents' medical providers and employers. This series of data collection activities is repeated each year on a new sample of households, resulting in overlapping panels of survey data.

The data from earlier surveys (1977 and 1987) have quickly become a linchpin for the Nation's economic models and their projections of health care expenditures and use. The level of detail these surveys provide permits the development of public and private-sector economic models to project national and regional estimates of the impact of changes in financing, coverage, and reimbursement, as well as estimates of who benefits and who bears the cost of a change in policy. No other surveys provide the foundation necessary for estimating the impact of changes on different economic groups or special populations of interest, such as the poor, elderly, veterans, the uninsured, or racial/ethnic groups.

MEPS establishment surveys have been coordinated with the National Compensation Survey conducted by the Bureau of Labor Statistics through AHRQ's participation in the Inter-Departmental Work Group on Establishment Health Insurance Surveys. Based on the Department's Survey Integration Plan, MEPS linked its household survey and the National Center for Health Statistics' National Health Interview Survey, achieving savings in sample frame development and enhancements in analytic capacity.

How MEPS data are used:

In the public sector: Entities such as the Office of Management and Budget, the Congressional Budget Office, the Medicare Payment Advisory Commission, and the Treasury Department rely on MEPS data to evaluate health reform policies, the effect of tax code changes on health expenditures and tax revenue, and proposed changes in government health programs such as Medicare.

In the private sector: MEPS data are used by many private businesses, foundations, and academic institutions—such as RAND, the Heritage Foundation, Lewin-VHI, and the Urban Institute—to develop economic projections.

By researchers: MEPS data are a major resource for the health services research community at large. Since 2000, data on premium costs from the MEPS Insurance Component have been used by the Bureau of Economic Analysis to produce estimates of the GDP for the Nation.


Key Findings from the MEPS Household Component*:

  • In the first half of 2001, 16.7 percent of Americans were uninsured, slightly up from 16.1 percent in 2000 and 15.8 percent in 1999.
  • Among those under age 65, more than a third of Hispanics (37.7 percent) and 20.2 percent of black non-Hispanics were uninsured during the first half of 2001, compared with 14.9 percent of white non-Hispanics.
  • Among people under 65, Hispanics accounted for one-fourth (26.3 percent) of the uninsured population even though they represented only 13.1 percent of the overall population this age.
  • Young adults ages 19-24 were the age group at the greatest risk of being uninsured in 2001, with one-third (33.9 percent) of this group lacking health insurance.
  • In 1999, about 84 percent of Americans had medical expenses, and the mean expense per person with expenses was just below $2,600.
  • In 1998, among those under 65, 82.1 percent had public or private insurance coverage.
  • Over half of elderly Americans were covered by private insurance in 1998; but more than 4 in 10 held only public coverage. This represents a decline in private coverage and an increase in public coverage from 1997.
  • Less than half of all Hispanic Americans and about half of black Americans were covered by private health insurance in 1998, compared with three-quarters of whites.
  • During the first half of 1997, nearly 30 percent of children under age 4, one in four children ages 4-6, and close to one in five children ages 7-12 had public health insurance coverage.
  • In 1997, 78.7 percent of workers were covered by private health insurance, compared with half of individuals who were not employed.
  • Among all racial/ethnic groups, Hispanic males were the most likely to be uninsured in 1997; 36.9 percent lacked coverage.

* Unless otherwise noted, all findings pertain to the U.S. civilian noninstitutionalized (community) population.

AHRQ has moved from conducting a medical expenditure survey every 10 years to following a cohort of families on an ongoing basis. Doing so has four primary benefits: (1) it decreases the cost per year of data collected, (2) it provides more timely data on a continuous basis, (3) it creates for the first time the ability to assess changes over time, and (4) it permits the correlation of these data with the National Health Accounts.

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