Wednesday, September 10, 2014
The National Bureau of Economic Research
NBER Working Paper No. 20462
Controlling Health Care Costs Through Limited Network Insurance Plans:
Evidence from Massachusetts State Employees
Jonathan Gruber, Robin McKnight
Recent years have seen enormous growth in limited network plans that
restrict patient choice of provider, particularly through state
exchanges under the ACA. Opposition to such plans is based on concerns
that restrictions on provider choice will harm patient care. We explore
this issue in the context of the Massachusetts GIC, the insurance plan
for state employees, which recently introduced a major financial
incentive to choose limited network plans for one group of enrollees and
not another. We use a quasi-experimental analysis based on the universe
of claims data over a three-year period for GIC enrollees. We find that
enrollees are very price sensitive in their decision to enroll in
limited network plans, with the state's three month "premium holiday"
for limited network plans leading 10% of eligible employees to switch to
such plans. We find that those who switched spent considerably less on
medical care; spending fell by almost 40% for the marginal complier.
This reflects both reductions in quantity of services used and prices
paid per service. But spending on primary care actually rose for
switchers; the reduction in spending came entirely from spending on
specialists and on hospital care, including emergency rooms. We find
that distance traveled falls for primary care and rises for tertiary
care, although there is no evidence of a decrease in the quality of
hospitals used by patients. The basic results hold even for the sickest
patients, suggesting that limited network plans are saving money by
directing care towards primary care and away from downstream spending.
We find such savings only for those whose primary care physicians are
included in limited network plans, however, suggesting that networks
that are particularly restrictive on primary care access may fare less
well than those that impose only stronger downstream restrictions.
Full paper available at this link:
The New York Times
September 9, 2014
Narrow Health Networks: Maybe They're Not So Bad
By Margot Sanger-Katz
Lots of people shopping in the new health care marketplaces this year
picked health plans that limited their choice of doctors and hospitals.
The plans were popular because they tended to cost less than more
conventional plans that covered nearly every health care provider in a
The proliferation of these more limited plans, called narrow networks,
has worried consumer advocates and insurance regulators. The concern is
that people will struggle to find the care they need if their choices
Maybe we don't have to worry so much. A new study suggests that, done
right, a narrow network can succeed in saving money and helping certain
patients get appropriate health care. The study, published as a working
paper with the National Bureau of Economic Research, looked at a program
that used financial incentives to steer workers into narrow plans. Those
that chose the plans saved their employer money, saw their primary care
doctors more and used the emergency room less.
Mr. Gruber says this study should not be the final word on narrow
networks, but he said he hoped it would change the tenor of the debate
about them. Instead of automatically seeing a narrow network as a
sinister plan feature, he said, he hopes market watchers will now see
them as a tool that can, in some cases, help save money without hurting
"Nobody is talking about forcing people into these plans," he said.
"We're talking about offering people a choice with price incentives."
NYT Reader Comments:
San Juan Capistrano, CA
Quoting from the Gruber and McKnight paper:
"We first find that patients are very price sensitive in their decisions
to switch to limited network plans…"
"…those who are most healthy are the most price sensitive."
"for the chronically ill… we find a strong shift in spending from
specialists to primary care physicians…"
"…we conclude that the real savings from limited network plans arises
from restrictions downstream from the primary care provider."
Healthy individuals buy the cheapest plans not worrying about the
choices in specialized care that they believe they will not need anyway.
But for chronically ill patients who are responsible for most of our
health care spending, they are losing specialized services when they are
enrolled in these narrow network plans.
This study was too short to be able to measure adverse outcomes due to
lack of specialized services. Shouldn't we find that out before most of
us are shoved into narrow networks?
Or better, shouldn't we take a closer look at proven systems that use
public policies to control spending without restricting patient choice -
models such as single payer or a national health service?
One thing that really concerns me about this is people with rare or
complex conditions that need specialty care. Waits, for example, for
endocrinology in my city are a minimum of 3 months for new patients and
diabetes is one of the nations' biggest health problems. It is also very
difficult now for new patients to find a new primary care MD depending
their insurance. Narrow networks prevent people from accessing care. I
am a nurse case manager, so arranging transitional care is what I do for
a living. I'm surprised to see this article. It's a little myopic.
Let's be honest. Narrow networks are fine for people who are not sick
now and are willing to take the chance that they will not get sick in
the coming year. If you are already ill or worry that you may become
ill, narrow networks are not good. Don't lie to us...
Further comment by Don McCanne
The most important finding in this study is that enrollment of
chronically ill patients in narrow networks results in a strong shift in
care from specialists to primary care physicians. That reduces costs,
but does it change outcomes? According to the authors, "we are unable to
demonstrate health effects with any certainty."
The work of Barbara Starfield and others has previously demonstrated
that a strong primary care infrastructure does provide greater value in
health care. But people with serious chronic disorders - where a
disproportionate share of our health care spending is directed - may
very well benefit from specialized care.
This study shows that narrow networks are used to block access to that
specialized care, simply by excluding coverage of much of the
specialized services offered within the community. As this study shows,
the care defaults to the generalist regardless of the patient's specific
A well functioning system would provide liberal access to primary care
services, which would then provide a portal to an appropriate level of
specialized services. A singe payer national health program would do
precisely that - primary care not serving as a gatekeeper but rather
serving as a resource to improve integration of health care services.
Narrow networks are a tool of private insurers used to reduce spending
by impairing access to care no matter how appropriate it might be.
Jonathan Gruber indirectly acknowledges the concerns people have about
narrow networks when he states, "Nobody is talking about forcing people
into these plans." But patients are backing into these plans simply
because they cannot afford other plans with more comprehensive networks.
Under single payer, the network is the entire health care delivery
system. That's the network that we need - for all of us.
at 3:34 PM