The effect of unobserved plan attributes on the health plan choices of Twin Cities Medicare beneficiaries

224 Pages·1996·7.9 MB·English

by  Harris, Katherine Marie

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The Effect of Unobserved Plan Attributes on the Health Plan
Choices of Twin Cities Medicare Beneficiaries _
ATHESIS SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF THE
UNIVERSITY OF MINNESOTA
BY
Katherine Marie Harris
s6--*.-,vSi.~.
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
June 1996
•
I -

UNIVERSITY OF MINNESOTA
This is to certify that I have examined this copy of a doctoral
thesis by
Katherine Marie Harris
and have found that it is complete and satisfactory in all
respects, and that any and all revisions required by the final
examining committee have been made.
Roger D. Feldman
Name of Faculty Adviser
Signature of Faculty Adviser
Date
GRADUATE SCHOOL
The Effect of Unobserved P±a.n attributes on the Health Plan
Choices of Twin Cities Medicare Beneficiaries
A THESIS SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF THE
UNIVERSITY OF MINNESOTA
BY
Katherine Marie Harris
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
June 1996
Acknowledgments
contriIbuwtoiuolnd olfikteimteo atnhdanekxpMeircthiaseel tKoeatnheisforstuhdiys.genIehraovues
benefited greatly from exposure to his creativity and his
gift for reducing complicated problems into simple
compcnents. I am also indebted to Roger Feldman, my
dissertation advisor, who gave generously of his time to
carefully read and comment on several drafts of this thesis.
His attention to detail yielded valuable insights and
criticism. I would also like to thank the other members of
my committee-- Bryan Dowd, Michael Finch, Robert Kane, John
Geweke-- for their thoughtful consideration of my thesis.
wJiolaln PcIeonnartmoidngureaantdetofHuolswearfrvoder Dateshgeeanhhruoomlloterzma.ondSdeulseannfctoFuarrharegerelmlejnudtsgemroevfnetdf,rainednds
poise, and commitment to learning. John iransue whose humor
and spirit allowed us to fulfill our social responsibility to
carpool with delight rather than a sense of burden. Special
thanks to my husband, Eric Lawrence, for his love and
support. I am especially grateful for his willingness to
help me to spell without forcing me to resort to the
dictionary.
This study was funded in part by a National Institute of
Health training grant and a Dissertation Fellowship funded by
the Health Care Financing Administration. I would also like
to acknowledge the generous donation of computer resources by
the Department of Economics.
©Katherine Marie Harris 1996
Abstract
The design and evaluation of policy interventions
intended to influence the nature of the Medicare health plan
market requires an understanding of the elderly-s health
plan choice process. To date, such an understanding has
been hampered by researchers' inability to measure and
include all of the health plan attributes that matter to
elderly decision makers in errpirical models of health plan
choice. Quality of care from the perspective of consumers
is an important example. This study addresses this problem
by controlling for the effect of cost sharing and unobserved
quality of care on plan choice. This suudy employs a new
approach to specification and estimation of choice model
parameters that treats these unobserved attributes as latent
variables. The approach draws heavily from models of brand
choice behavior as well as from recent advances in
econometric methods for estimating discrete choice models.
Results suggest that Twin Cities Medicare beneficiaries
perceived the quality of care in the fee-for-service
supplemental plans to be greater than that in the health
maintenance organizations. Also, supplemental plans in the
analysis were perceived as having greater quality of care
than the basic Medicare entitlement. Finally, Twin Cities
elderly perceived the managed care and the fee-for-service
sector as offering comparable levels of convenience.
111
Dedicated to my three grandmothers:
Gladys Hall, Dorothy Harris, and Edna Hall.
-.V
Table of Contents
Chapter Page
I. Introduction 1
Medicare and Supplemental Plans 5
A Model of Health Plan Choice 7
Model Specification and Estimation 9
Data Source 9
Results 10
Conclusion 11
II. Medicare Program and Supplemental
Health Plans 13
Overview of the Medicare Progro 13
Part A 13
Part B 13
Health Plans Supplementing Medicare 15
Plan Types 15
Plan Sponsorship 17
Plan Characteristics 19
Employer-Sponsored Plans 19
Individual Market Plans 21
Health Plan Choice Barriers 21
Knowledge of Health Plan Coverage 21
System Outcomes 25
Cost 25
Access 27
Quality 28
Quality from the Perspective of Consumers..33
Consumer definitions of Quality 34
Lack of Px^n Quality Information 35
influencing Health Plan Choices 37
Medicare HMOs 38
Medigap Standards 39
Medicare Catastrophic Act 4
Increasing Cost Sharing Requirements 40
Market-Based Reforms 4i
Information 42
Summary 43
III. Alternative Health Plan Choice Models 46
importance of Model Selection 46
Alternative Health Plan Choice Models 48
Characteristics of Decision Makers 48
Multiattribute Choice Models 52
Linear Compensatory Decision Rules 53
Expected Utility Theory 55
Identifying Relevant Attributes 57
Barriers to Measuring Plan Attributes 59
iv
8
The Meaningful Measure Problem 59
The Missing Attribute Problem *2
Consequences of Omitting Relevant Attributes....6«4
Solving Measurement Problems
Develop Proxy Measures °=
Consumer Evaluations °°
Consumer Satisfaction °'
Experimental Settings °*
Unobserved Attributes as Model Parameters 7
CUhsoiincge-aBMaesaesduMraerkoeftAMtatprpiibnugte importance >7J6-
Summary
IV. Model Specification and Estimation
Methodology
AOvMeordveilewof Health Plan Choice •• «8p•1,?
incorporating Unobserved Plan Attributes....85
Iidnednetpiefnidceantcieonof irrelevant Alternati;ves 91
ExMtuelntdiendomHieatlerPorgoebnietous Logit vs. ^
Simulated Maximum Likelihood Estimator
95
Summary '
Data Source and Empirical Specification...9
Twin Cities Medicare Data .98
LTAihtmetirtiSibentugteoAfniawmlepyaoslrittshantcPoelanSuAblgtroeurpnatives 111000025
OLbatseenrtvedAtAttrtirbiubtuetses ,,111111045
Summary .
VI. Empirical Findings .123
Model Selection .124
Restricting Preference Equation Constants..las
Number and Interpretation of Latent
MeAatstruirbeumteenst Error in importance Wei'g.h'Ltis" 112259
Final Model Results
Preference Equation Estimates
Perceptual Parameter Estimates 1"355
A. Quality
B. Convenience -L-3D
Perceived Differences among
FFS Plans • 137
Choice Probabilities for "Prototype"
Decision Makers 138
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