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Greater competition among health plans is linked to more advertising that targets healthier patients

Medicare beneficiaries are the targets of advertising from an unprecedented number of health plans offering them prescription drug coverage under the new Medicare prescription drug program. Previous Medicare managed care efforts have been undermined by risk selection, the practice of enrolling healthier and therefore less costly patients. A new study, supported in part by the Agency for Healthcare Research and Quality (HS10771), found that increased competition among health plans was associated with greater use of advertising that targeted healthier patients.

R. Adams Dudley, M.D., M.B.A., of the University of California, San Francisco, and colleagues Ateev Mehrotra, M.D., M.P.H., of Harvard Medical School, and Sonya Grier, Ph.D., M.B.A., of the University of Pennsylvania, examined how health plan advertising content was related to the competitiveness of the health plan market. The researchers developed a method for coding risk-selective characteristics (those that would attract healthier people) in ads. They used a final set of 10 risk-selective ad characteristics to examine risk selection in a national sample of health plan print ads and how risk selection changed in those ads over time. The focus was on the relationship between frequency of risk-selective ads and health maintenance organization (HMO) market share as a marker of competition. They looked at all types of health plan ads, including Medicare, HMO, and Preferred Provider Organization ads.

Based on coding of the 693 ads included in the database, the use of ads attractive to healthy patients increased nationally from the 1970s through the 1990s, a time when HMOs became more common and gained market share. Further, in 2000, the use of such ads was more common in markets with higher HMO market share than in those with lower market share. Two random samples of plan ads from 2000 showed that in markets with high HMO market share, the mean number of "attract healthy" characteristics in ads was 0.6 or higher, while in markets with low HMO market share, it was below 0.3. There was no consistent relationship between "attract sick" ads and HMO market share. These correlations suggest that as competition increased, health plans attempted to risk-select through advertising.

See "The relationship between health plan advertising and market incentives: Evidence of risk-selective behavior," by Drs. Mehrotra, Grier, and Dudley, in the May 2006 Health Affairs 25(3), pp. 759-765.

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