The impact of 1990 Medicaid drug rebates policy on access to prescriptions.

The U.S. Congress passed a new law (PL 101-508) in 1990 requiring the pharmaceutical manufacturers to grant rebates on prescription drugs sold at retail under the federal Medicaid program. The goals include containing Medicaid program costs and expanding access of the indigent to ethical drug treatments. This paper evaluates the impact of HCFA's mandatory federal upper limit (FUL) prices on the retail sales volume of prescription drugs during 1994. Data of the most frequently dispensed drugs, as measured by the National Prescription Audit of IMS America, are used. Regression model results suggest that the competing drug prices impact sales significantly, and Medicaid drug rebates expand access to drug interventions by stimulating retail transactions. Prescription sales are also own-price insensitive (inelastic) in Medicaid and non-Medicaid market segments. The implications of extending Medicaid prescription drug rebates policy to enrollees in the traditional Medicare program are examined.

Managed care, deficit financing, and aggregate health care expenditure in the United States: a cointegration analysis.

We applied a battery of cointegration tests comprising those of Johansen and Juselius [19], Phillips and Hansen [35], and Engle and Granger [6], to model aggregate health care expenditure using 1960-96 US data. The existence of a stable long-run economic relationship or cointegration is confirmed, in the United States, between aggregate health care expenditure and real GDP, population age distribution, managed care enrollment, number of practicing physicians, and government deficits. The evidence of cointegration among these variables, chosen on the theoretical basis of prior studies, implies that while they are individually non-stationary in levels, together they are highly correlated and move, in the long run to form an economic equilibrium relationship of US aggregate health care expenditure. More specifically, and for the first time in this line of inquiry, (i) managed care enrollment is found to be negatively associated with the level of health care spending, (ii) supply disinduced demand effects of physicians tend to moderate health expenditure, and (iii) government deficit financing is positively related to health care spending. The observed sign and magnitude of the income coefficient are consistent with health care being a luxury good.

Health care expenditure inertia in the OECD countries: a heterogeneous analysis.

Health care expenditure studies of the Organization for Economic Cooperation and Development (OECD) countries remain important because their findings often suggest cost containment and other policy initiatives. This paper focuses on the compatibility of OECD health data with the "expenditure inertia" (or lagged adjustments) hypothesis, by modeling individual country time-series data of 21 nations for the 1960-1993 period. Maximum likelihood estimates of the Box-Cox transformation regression models reveal that: (a) the hypothesized impact of health "expenditure inertia" is both pervasive and strong, averaging 0.64 across the countries; (b) the real GDP elasticities of health care expenditures vary widely among the countries and average 0.34 in the short run--implying that health care is a necessity; (c) the long run GDP elasticities are less than 1 in 8 countries, unitary elastic in 8 countries and elastic in 5 countries--suggesting that health care is not universally a necessity or a luxury commodity for the OECD countries; (d) physician-inducement effects (dis-inducement in a few countries) are weak, with a mean elasticity estimate of 0.17; and (e) no unique functional form approximation model is globally compatible with the data across the countries. Health care cost containment policy implications of these findings are explored.

Determinants of specialty physician practice management integration.

Physicians increasingly organize strategically to mitigate the potentially adverse impacts of managed care on practice incomes. There are alternative routes to physician organizing. This article used a 1996-1997 survey of orthopedics and obstetrics-gynecology (OB-GYN) practices in Memphis, Tennessee, to investigate the determinants of specialty physician integration through physician practice management (PPM) firms. The percentage of managed care contracts indicates a weak but positive correlation with PPM integration. Different factors appear to influence the likelihood of integration in different specialties.

Determinants of specialty physician practice management integration.

Physicians increasingly organize strategically to mitigate the potentially adverse impacts of managed care on practice incomes. There are alternative routes to physician organizing. This article used a 1996-1997 survey of orthopedics and obstetrics-gynecology (OB-GYN) practices in Memphis, Tennessee (a large medical services market), to investigate the determinants of specialty physician integration through physician practice management (PPM) firms. The percentage of managed care contracts indicates a weak but positive correlation with PPM integration. Different factors appear to influence the likelihood of integration in different specialties. Probit model results of the OB-GYN data suggest the increased likelihood of integration in practices with at least seven physicians. The probability of PPM integration is associated with significant economies of scale in the number of non-physician clinical employees per physician. Probit estimates of the orthopedics specialty indicate the likelihood for integration as significantly inversely related to the total number of clinical and non-clinical employees. Given physical capital intensity in orthopedics, the exhaustion of scale economies at a lower level of an integrated practice employment is expected. The strong predictive power of the probit model estimates makes it a useful tool for predicting the likelihood that a randomly chosen specialty practice is integrated.

Medicare physician payment reform and the utilization of cardiovascular procedures.

Effective 1992, the US Congress implemented the Resource-Based Relative Value Scale (RBRVS) for pricing and reimbursing Medicare physician services. This study evaluates the post-1991 impacts of RBRVS on the utilization volumes of two leading cardiovascular procedures--Percutaneous Transluminal Coronary Artery (PTCA) and Coronary Artery Bypass Grafts (CABG). The regression model results based on HCFA-supplied data suggest that the new reimbursement policy reduced (increased) utilization volumes of the more (less) expensive CABG (PTCA) procedures. Physician adjustments to tightened HCFA reimbursements are partly aided by the increased percentage of Medicare patients enrolled in Medigap. The RBRVS fee schedule appears to be meeting its intended cost containment policy goals for the leading cardiovascular procedures.

Will the real elasticity of substitution 'in Norwegian dentistry' please stand up?

The non-homothetic production cost structure in Norwegian private dentistry involves more than two factor inputs. Consequently, this paper implements-separately for solo and group practices-three conceptually different measures of factor substitutions to infer the precise nature of input associations using translog cost model estimates based on 1993 data. We calculate own- and cross-price elasticities of factor demands, pairwise elasticities of substitution and their approximate S.E.s. We find that: (1) dentists and dental assistants cannot be consistently aggregated as one homogeneous labour input; (2) input demands are inelastic; (3) the theoretically restrictive Allen-Uzawa and the less restrictive shadow and Morishima elasticities of substitution are not equivalent; (4) dentists and auxiliary dental personnel relate as significant substitutes in solo practices and as significant complements in group practices; (5) 'supplies' (e.g., dental materials) in the aggregate are substitutes for the two types of dentistry labour; and (6) there appears to be a wider scope for factor substitutions in group rather than solo practices. Due to inelastic factor demands, opportunities for cost controls are limited despite some tendencies for factor interchange. Finally, future researchers of production costs involving more than two inputs should investigate the less restrictive, alternative measures of factor substitutions.

Models for the comparative equivalence of scattering properties of elemental filters used in diagnostic radiology.

While the equivalence of different filter materials commonly considered useful in diagnostic radiology can be obtained in terms of the overall transmitted primary photons, the scattering characteristics are not the same. In this work, comparative models that relate the scattered photons produced from one-filter material with those from another have been developed. The comparison of the results of simulation of the scattering properties of these equivalent filter materials using the Monte Carlo technique with those from the models developed in the study are in reasonable agreement.

Financing structure dynamics and other determinants of Medicaid pharmaceutical expenditures, 1993-1996.

Medicaid budgets, growing two to three times faster than total state budgets, constitute the fastest growing component of state budgets. Due to their high expenditure growths, pharmaceutical benefits, a cost-effective provision of the indigent health program, gradually began restructuring in the early 1980s. More recent policy shifts (beginning in the early 1990s) toward managed Medicaid (federal HCFA Waivers 1115 and 1915b) are placing renewed emphasis on minimizing program expenditures, expanding access, and reducing cost-ineffective interventions. Therefore, this article investigates the roles that changes in the Medicaid finance configurations, cost-control policies, and program design attributes play as determinants of indigent drug expenditures of states. (Medicaid Compilation Data for 1993 and 1996, obtained from the National Pharmaceutical Council, were used in multiple regression analysis.) Cost containment policy recommendations for managing the drug program expenditures are discussed.

Cost efficiency, factor interchange, and technical progress in US specialized hospital pharmacies.

Specialized hospitals perform unique, technologically more complex, and relatively expensive medical procedures. Growing use of high-cost biotechnology drugs and increased clinical pharmacy tasks at these facilities have increased costs. This paper used a unique data set supplied by Eli Lilly, and a dual translog cost system to model the costs of specialized hospital pharmacy production. Results show that the potential substitution of pharmacy technicians for registered pharmacists and the decomposed technical change savings effects of expensive factors of production offer the greatest opportunities for containing costs. Slight diseconomies of scale were also observed.

Relative success of state-managed behavioral health care: does the financing structure play any role?

Federal Section 1915(b) and Section 1115 waivers, through the Health Care Financing Administration, are the primary modes for implementing Medicaid-managed mental health and chemical dependency services. This paper focuses on three distinct case studies of managed mental health programs in Tennessee, Massachusetts, and Hawaii. The purpose is to determine, among other design factors (such as carve-in, carve-out, and covered services) the specific roles that differences in the financing structure play in the relative success of these programs. Findings from the three distinct models should provide lessons for the impending mental health programs of other states, including those in the varying stages of implementation.