Just a couple of interesting articles in the New York Times over the past week or so. The first is a good write-up about the revamping of the US food bank logistics chain:
A task force at Feeding America — which included Professor Prendergast, Ms. Morgan and others — adopted this approach. They embraced a bidding system using a virtual currency. Crucially, food banks with the greatest need received the most currency and so could place the highest bids, harnessing the benefits of a free market with fairness in the distribution of the underlying wealth.
The new system started in 2005 and quickly proved successful, sometimes in unexpected ways….
In the seven months after the new, more efficient system went into action, food donations increased by 50 million pounds, Professor Prendergast’s data indicates. Cause and effect is difficult to demonstrate, but the greater efficiency in making use of donations may have led to more donations….
This is an important point: Many economics textbooks separate efficiency from equity, but perceptions of the two are intertwined. The efficiency of the Feeding America market was intimately tied to its equity.
The other article is about Medicare Advantage and how it seems to have spill-off effects on local modes of practice that lead to lower Medicare FFS spending
The mysteries may be connected by something that appears, at first, to be unrelated: Doctors and hospitals tend to treat insured patients the same way, regardless of what kind of coverage they have. A traditional Medicare patient admitted to the hospital with, say, pneumonia will receive the same standard of care as a similar but privately insured pneumonia patient.
From this, an idea emerges that links the two mysteries. As enrollment in Medicare Advantage plans grows, so too do the plans’ influence over how doctors and hospitals provide care. Unlike the traditional program, Medicare Advantage plans establish networks, covering care provided only by certain doctors and specific hospitals. Often those are the ones with lower cost growth. As doctors and hospitals reduce their cost growth to gain access to Medicare Advantage networks and the increasing number of patients enrolled in the plans, they do so for traditional Medicare patients as well.
So, as Medicare Advantage enrollment swells, the growth in the cost of care for traditional Medicare falls — a spillover effect. That’s the theory, anyway. Does it hold water?
A few studies have examined the question, and all support the spillover theory. The first study, examining the period from 1994 through 2001, found that when the proportion of Medicare beneficiaries enrolled in Medicare H.M.O.s grew by an additional percentage point, per enrollee spending in traditional Medicare fell by one percentage point. Another study, focused on the period from 1999 to 2009, found that a 10-percentage-point increase in Medicare Advantage market share was associated with a 4.5 percent decrease in per enrollee traditional Medicare hospital costs and a commensurate reduction in duration of hospital stays.
Are the same factors at play here?