Do Financial Incentives Affect Utilization for Chronically Ill Medicare Beneficiaries?

Area of Science:

• Health Economics
• Healthcare Utilization
• Medicare Policy

Background:

• Understanding price sensitivity is crucial for healthcare policy.
• Medicare Advantage plans involve cost-sharing structures that influence beneficiary choices.
• Chronic conditions necessitate regular healthcare interactions, making beneficiaries potentially sensitive to cost variations.

Purpose of the Study:

• To investigate the price sensitivity of provider visits for Medicare Advantage beneficiaries.
• To analyze how cost-sharing affects the utilization of primary care and specialist services.
• To identify potential substitution effects between different types of healthcare visits based on copayment levels.

Main Methods:

• Utilized Medicare Advantage encounter data from 2014-2017.
• Analyzed the impact of copayment size on visit utilization and probability.
• Employed regression analysis with beneficiary- and plan-level control variables for individuals with chronic conditions.

Main Results:

• Copayment reductions correlated with minor increases in healthcare utilization (elasticities <-0.2).
• Observed substitution effects: decreased primary care provider copays led to fewer specialist visits (cardiology, endocrinology).
• Individuals with chronic conditions exhibited responsiveness to copay changes, albeit with small magnitude.

Conclusions:

• Beneficiaries with chronic conditions are responsive to copay changes, though the effect is modest.
• Reducing primary care provider copayments may decrease the utilization of certain specialist services.
• Lowering primary care provider copays could be a strategy to manage specialist overuse, if applicable.