"The Asset Cost of Poor Health"  
HKS Working Paper No. RWP11-005

JAMES M. POTERBA, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER)
Email: poterba@mit.edu
STEVEN F. VENTI, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER)
Email: Steven.F.Venti@dartmouth.edu
DAVID A. WISE, National Bureau of Economic Research (NBER), Harvard University - Harvard Kennedy School (HKS)
Email: dwise@nber.org

This paper examines the correlation between poor health and asset accumulation for households in the first nine waves of the Health and Retirement Survey. Rather than enumerating the specific costs of poor health, such as out of pocket medical expenses or lost earnings, we estimate how the evolution of household assets is related to poor health. We construct a simple measure of health status based on the first principal component of HRS survey responses on self-reported health status, diagnoses, ADLs, IADL, and other indicators of underlying health. Our estimates suggest large and substantively important correlations between poor health and asset accumulation. We compare persons in each 1992 asset quintile who were in the top third of the 1992 distribution of latent health with those in the same 1992 asset quintile who were in the bottom third of the latent health distribution. By 2008, those in the top third of the health distribution had accumulated, on average, more than 50 percent more assets than those in the bottom third of the health distribution. This “asset cost of poor health” appears to be larger for persons with substantial 1992 asset balances than for those with lower balances.

"Findings From the 2011 EBRI/MGA Consumer Engagement in Health Care Survey"  
EBRI Issue Brief, No. 365, December 2011

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: fronstin@gmail.com

This paper presents findings from the 2011 EBRI/MGA Consumer Engagement in Health Care Survey. This study is based on an online survey of 4,703 privately insured adults ages 21-64 to provide nationally representative data regarding the growth of consumer-driven health plans (CDHPs) and high-deductible health plans (HDHPs), and the impact of these plans and consumer engagement more generally on the behavior and attitudes of adults with private health insurance coverage. Findings from this survey are compared with EBRI’s findings from earlier surveys. The survey finds continued growth in consumer-driven health plans: In 2011, 7 percent of the population was enrolled in a CDHP, up from 5 percent in 2010. Enrollment in HDHPs increased from 14 percent in 2010 to 16 percent in 2011. The 7 percent of the population with a CDHP represents 8.4 million adults ages 21-64 with private insurance, while the 16 percent with an HDHP represents 19.3 million people. Among the 19.3 million individuals with an HDHP, 38 percent (or 7.3 million) reported that they were eligible for a health savings account (HSA) but did not have such an account. Overall, 15.8 million adults ages 21-64 with private insurance, representing 13.1 percent of that market, were either in a CDHP or were in an HDHP that was eligible for an HSA but had not opened the account. When their children are counted, about 21 million individuals with private insurance, representing about 12 percent of the market, were either in a CDHP or an HSA-eligible plan. 

Individuals in CDHPs were more likely than those with traditional coverage to exhibit a number of cost-conscious behaviors. They were more likely to say that they had checked whether their plan would cover care; asked for a generic drug instead of a brand name; talked to their doctor about treatment options and costs; talked to their doctor about prescription drug options and costs; developed a budget to manage health care expenses; checked a price of service before getting care; and used an online cost-tracking tool. CDHP enrollees were more likely than traditional plan enrollees to report that they had the opportunity to fill out a health risk assessment, and they were also more likely to report that they had access to a health promotion program. CDHP enrollees were also more likely to report that they had been offered a cash incentive or reward to participate in a wellness program when a program was offered. HDHP enrollees were less likely to report having the opportunity to fill out a health risk assessment and to have access to a health promotion program. When it comes to participating in a wellness program, CDHP enrollees were more likely than traditional plan enrollees to take advantage of the health risk assessment but not the health promotion program. Among those participating, the reasons they gave were that they were offered incentive prizes and reduced premiums. Among those not participating, the reasons they gave were that they could make changes on their own; they lacked time; and they were already healthy. Financial incentives were more a factor for CDHP enrollees than for traditional plan enrollees when it came to participating in wellness programs. A significant portion of the population reported using a smartphone, and 1 in 5 reported using a tablet. Among them, about one-quarter reported using an app for health-related purposes. Among those not using an app, nearly one-half were interested in using one.

"Variation in Public Opinion on the Future of Employment-Based Health Benefits: Findings From the 2011 Health Confidence Survey"  
EBRI Notes, Vol. 32, No. 12, December 2011

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: fronstin@gmail.com

This paper examines current public opinion surrounding the future of employment-based health coverage and how it varies by demographics, health status, and selected questions on satisfaction with health care and ratings of the health care system in the United States. The public is in large part confident that employers and unions will continue to offer health coverage following enactment of the federal health reform law. In 2011, 57 percent of individuals with employment-based coverage were extremely or very confident that their employer or union would continue to offer health coverage. However, they are not confident that they could afford to purchase coverage on their own even if they were given the money by plan sponsors. In 2011, 20 percent were extremely or very confident that they could afford to purchase coverage. When it comes to picking a health plan, the majority of the population is very or somewhat confident in their ability to compare different plan options and choose the best plan, while nearly 1 in 5 are extremely confident or not confident that they could compare different plans and choose the best plan. Individuals who are most confident in the future availability of employment-based health benefits and in their ability to afford and choose the best plan are those who are more educated, have higher income, are more satisfied with their health coverage, and rate the U.S. health care system higher. Despite the low confidence levels that they could afford to purchase coverage, very few individuals reported that they are not likely to purchase coverage if employers and unions stopped offering it. The data come from the EBRI/MGA 2011 Health Confidence Survey (HCS), which examines a broad spectrum of health care issues, including Americans’ satisfaction with health care today, their confidence in the future of the health care system and the Medicare program, and their attitudes toward health care reform. 

The PDF for the above title, published in the December 2011 issue of EBRI Notes, also contains the fulltext of another December 2011 EBRI Notes article abstracted on SSRN: “Retirement Age Expectations of Older Americans Between 2006 and 2010.”

"Does Retiree Health Insurance Encourage Early Retirement?"  
NBER Working Paper No. w17703

STEVE NYCE, Towers Watson
Email: steven.nyce@towerswatson.com
SYLVESTER J. SCHIEBER, Towers Watson
Email: SYL_SCHIEBER@WATSONWYATT.COM
JOHN B. SHOVEN, Stanford University - Department of Economics, National Bureau of Economic Research (NBER)
Email: shoven@stanford.edu
SITA N. SLAVOV, Occidental College - Department of Economics
Email: sslavov@oxy.edu
DAVID A. WISE, National Bureau of Economic Research (NBER), Harvard University - Harvard Kennedy School (HKS)
Email: dwise@nber.org

The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2 percent) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2 percent) increase in the probability of turnover at age 63; it has a more modest effects for individuals under the age of 62. A more generous employer contribution of 50 percent or more raises turnover by 1-3 percentage points at ages 56-61, by 5.9 percentage points (33.7 percent) at age 62, and by 6.9 percentage points (43.7 percent) at age 63. Overall, an employer contribution of 50 percent or more reduces the total number of person-years worked between ages 56 and 64 by 9.6 percent relative to no coverage.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

"Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006-2011"  
EBRI Issue Brief, No. 367, January 2012

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: fronstin@gmail.com

This paper examines HSA and HRA assets, account balances, and rollover amounts, using data from the 2011 EBRI/MGA Consumer Engagement in Health Care Survey (CEHCS), sponsored by the Employee Benefit Research Institute and Mathew Greenwald & Associates. It then examines differences and trends in account balances by demographics, income, contribution levels, and engagement in an individual’s own health care using a regression equation. Rollover amounts are then examined. In 2011, there was $12.4 billion in health savings accounts (HSAs) and health reimbursement arrangements (HRAs), spread across 8.4 million accounts, according to data from the 2011 CEHCS. This is up from 2006, when there were 1.3 million accounts with $873.4 million in assets, and 2010, when 5.4 million accounts held $7.3 billion in assets. After average account balances leveled off in 2008 and 2009, and fell slightly in 2010, they increased in 2011. In 2006, account balances averaged $696. They increased to $1,320 in 2007, a 90 percent increase. Account balances averaged $1,356 in 2008 and $1,419 in 2009, 3 percent and 5 percent increases, respectively. In 2010, average account balances fell to $1,355, down 4.5 percent from the previous year. In 2011, average account balances increased to $1,470, a 9 percent increase from 2010. After declining to $1,029 in 2010, average rollover amounts increased to $1,208 in 2011. Total assets being rolled over increased as well: $6.7 billion was rolled over in 2011, up from $3.7 billion in 2010. The percentage of individuals without a rollover remained at 13 percent in 2011. Individuals who smoke have more money in their accounts than those who do not smoke. In contrast, obese individuals have less money in their account than the nonobese. There is very little difference in account balances by level of exercise. Very small differences were found in account balances and rollover amounts between individuals who used cost or quality information, compared with those who did not use such information. However, next to no relationship was found between either account balance or rollover amounts and various cost-conscious behaviors. When a difference was found, those exhibiting the cost-conscious behavior were found to have lower account balances and rollover amounts. Men have higher account balances than women, older individuals have higher account balances than younger ones, account balances increase with household income, and education has a significant impact on account balances independent of income and other variables.

"The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26"  
EBRI Notes, Vol. 33, No. 1, January 2012

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: fronstin@gmail.com

The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010, requires that group health plans and insurers make dependent coverage available for children until they attain the age of 26, regardless of tax or student status, or dependent status as it relates to financial support. The mandate to offer coverage to adult children ages 19-25 took effect for policy years that begin on or after Sept. 23, 2010, but since January is the beginning of the plan year for most employment-based health plans, many insurers adopted the requirements of the law before the effective date. This paper reviews the evidence as to whether the mandate to extend coverage to adult children had an effect on the percentage of young adults with coverage in late 2010 and early 2011. Data from the Census Bureau’s Current Population Survey (CPS) and Survey of Income and Program Participation (SIPP) are examined, as well as data from the Center for Disease Control’s National Health Interview Survey (NHIS). According to data from the CPS, the percentage of persons ages 19-25 with employment-based coverage as a dependent increased from 24.7 percent in 2009 to 27.7 percent in 2010. SIPP shows that the percentage of individuals ages 19-25 with employment-based health coverage as a dependent averaged 26.9 percent during January-September 2010, and increased to an average 27.1 percent during October and November. According to data from the NHIS, the percentage with private insurance increased from 51 percent to 55.8 percent, and the percentage uninsured fell from 33.9 percent during 2010 to 28.8 percent during the first half of 2011 among those ages 19-25. Data from these three surveys show that PPACA has had a positive effect on the percentage of young adults with employment-based coverage as a dependent.

The PDF for the above title, published in the January 2012 issue of EBRI Notes, also contains the fulltext of another January 2012 EBRI Notes article abstracted on SSRN: “Spending Adjustments Made By Older Americans to Save Money.”

"Fairness Versus Welfare in Health Insurance Content Regulation"  
University of Illinois Law Review, 2012
Minnesota Legal Studies Research Paper No. 12-02

AMY MONAHAN, University of Minnesota - Twin Cities - School of Law
Email: monahan@umn.edu

Regulating the content of health insurance contracts, where the government determines which medical treatments and services must be covered, creates tension between principles of fairness and principles of welfare economics. Principles of fairness, after all, may require that all medical losses be shared within a community, while principles of welfare economics would advocate regulation only where there is some form of market failure that leads to an inefficient or suboptimal result. As part of recently enacted federal health care reform, the federal government will, for the first time, have the primary responsibility of regulating the content of privately financed health insurance policies, although the federal government is given the statutory option to borrow heavily from existing state regulation. This Article provides the first comprehensive study of the state legislative process with respect to health insurance content regulation. In the states studied, the author finds that both fairness and welfare claims influence mandate passage, with little reliance by legislators on outside evidence substantiating welfare claims. In contrast to theoretical writings on health insurance content regulation, which emphasize market failure as the primary justification for mandates, this current study finds that mandates were rarely premised on correcting defects in the insurance market. Rather, the justifications provided tend to be more paternalistic in orientation, often based on a desire to increase suboptimal utilization of a particular medical treatment or service regardless of the reason why individuals lack coverage. Even where there is an independent, expert commission providing robust data on proposed regulation, bills with virtually no impact on either health insurance coverage or treatment utilization are passed. Given these findings, this Article argues that the federal government should be hesitant to rely upon existing state-level regulation when it defines “essential health benefits” as part of health care reform.

"Spending Adjustments Made by Older Americans to Save Money"  
EBRI Notes, Vol. 33, No. 1, p. 7, January 2012

SUDIPTO BANERJEE, Employee Benefit Research Institute (EBRI)
Email: banerjee@ebri.org

This paper presents evidence suggesting that a large part of the older population may be making involuntary spending adjustments. The data used for this analysis come from the 2009 Internet Survey of the Health and Retirement Study (HRS), the most comprehensive national survey of older Americans. HRS is sponsored by the National Institute on Aging (NIA) and Social Security Administration (SSA) and is administered by the Institute for Social Research (ISR) at the University of Michigan. A subsample of the HRS 2008 Core Survey (of persons who reported having Internet access) and respondents from earlier HRS Internet Surveys were selected for the 2009 Internet Survey. The field period for the survey was from March 2009 to August 2009, and it received 4,433 complete responses. Data from the 2009 Internet Survey show that more than 1 in 5 (21.5 percent) of those aged 50 or above made prescription drug changes such as switching to cheaper generic drugs, getting free samples, stopping pills or reducing dosages, and nearly as many (19.4 percent) skipped or postponed doctor appointments to save money. Among those in (self-reported) poor health, 29.9 percent made prescription drug changes and 36.5 percent skipped or postponed doctor appointments to save money. For those in excellent health, the comparable numbers were 15.3 percent and 9.5 percent, respectively. Among different demographic groups, single women and blacks had the highest involuntary spending adjustments: 22.8 percent and 24.8 percent of single women made prescription drug changes and skipped or postponed doctor appointments to save money. Similar numbers for blacks were 25.9 percent and 27.3 percent, respectively. The study suggests that the consumption behavior of a large section of the older population may be “optimal” only when viewed within the limits of the inadequate resources they have available. Retirement income adequacy studies that use such consumption data will benefit if such involuntary spending adjustments can be separated from “optimal” spending adjustments. Better data and more research are needed to improve knowledge in this area.

The PDF for the above title, published in the January 2012 issue of EBRI Notes, also contains the fulltext of another January 2012 EBRI Notes article abstracted on SSRN: “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26.”

"Bending the Health Cost Curve: The Promise and Peril of the Independent Payment Advisory Board" 

JAMES BRADFORD DELONG, University of California, Berkeley, Federal Reserve Bank of San Francisco, National Bureau of Economic Research (NBER)
Email: delong@econ.berkeley.edu
ANN MARIE MARCIARILLE, UC Hastings College of the Law
Email: marciarille@gmail.com

Underlying today's and the future's health care reform debate is a consensus that America's health care financing system is in a slow-moving but deep crisis: care appears substandard in comparison with other advanced industrial countries, and relative costs are exploding beyond all reasonable measures. The Obama Administrations' Patient Protection and Affordable Care Act (ACA) attempts to grapple with both of these problems. One of the ACA's key instrumentalities is the Independent Payment Advisory Board - the IPAB, designed to discover and authorize ways to reduce the rate of growth of Medicare and other categories of health spending. The IPAB is a peril. Expert boards to perform regulatory tasks in the interest of efficiency and social goals always run a high risk of being captured. Even should it succeed at its task, who is to say the reductions will not come at a heavy cost in reduced quantity and effectiveness of medical care? But the IPAB also has promise. The need for a better process than our current specialist-driven one to assign value to the medical services provided by Medicare is great. The bellwether status of Medicare payment systems means that commercial insurance consumers and payors would also benefit mightily from bringing more coherent, technocratic, and cost effectiveness-oriented logic to this process.