Online Program

Health Plan Type Variations in Spells of Health Care Treatment

*Randall P Ellis, Boston University 
Wenjia Zhu, Boston University 

Keywords: health care spending, treatment spells, risk adjustment, exclusive provider organizations, consumer-driven health plans

This paper analyzes 30-day "treatment spells"---fixed length periods that commence with a service after a gap in provider contact---to examine how health care use and spending of insured employees at large firms are influenced by exclusive provider organizations (EPOs) and health maintenance organizations (HMOs), which use narrow provider panels, and consumer-driven/high-deductible (CDHDs) health plans that raise cost sharing and promote wider consumer choice. EPOs and HMOs reduce the probability of visits mainly through reducing new and continuing visits with little effect on chronic, repeat visits. When we decompose spending in spells into pricing, treatment, and coding intensity, we find no evidence that EPOs, HMOs, or CDHDs manage to achieve lower prices relative to PPOs. Treatment intensities explain little of the variation in health spending. EPOs, HMOs, and CDHDs display higher coding intensities than PPOs. Overall, EPOs are associated with (weakly) lower total spending on procedures relative to PPOs. Much of the relative cost savings of HMOs and CDHDs disappear once we control for endogenous plan type choice, individual fixed, effects and patient severity of illness.