Does Type of Health Insurance Matter ?

1 Does Type Health Insurance Matter? Since most individuals do not possess adequate knowledge to diagnose and treat their own health problems, they seek advice from physicians who act as their agents. These agents are expected to provide the necessary diagnosis and care. To pay for this care, the average individual purchases health insurance as an important guarantee against medical care's high costs. However, profit-maximizing behavior implies that providers supply superior care for patients with the more generous insurance reimbursements, implying that the lesser or uninsured receive different procedures than say privately insured patients. 1 For this reason, current thinking suggests that one's health insurance quality shapes the care a patient is likely to receive. 2 Perhaps for this reason, in his 1999 State of the Union address, then President Clinton reiterated his call for a patient's bill of rights. Following this, the U.S. House of Representatives passed a bill giving " Americans the right to challenge medical decisions made by insurers and HMOs " which the U.S. Senate rejected. 3 Because the perception still remains that insurance restrictions hinder adequate medical care, Senators John McCain (R-Arizona) and Edward Kennedy (D-Massachusetts) co-sponsored a new bill, presumably based on the assumption that specific types of health insurance affect the type and quantity of health care received. 4 Although there is much anecdotal evidence, it is important to answer the question whether one's health insurance makes a difference in a patient's medical treatment. 5 Indeed, as will be discussed later, there is mixed evidence. Complicating one's success in measuring differences in medical treatment (even for a given illness) is a number of statistical issues. Among the more prominent of these are heterogeneity and selectivity concerns relating to a patient's preexisting health and choice of physician and medical insurance in the first place. Also accounting for differences in how medicine is practiced across hospitals and geographic areas plays a role. Getting at each of these potential biases entail appropriately adjusting for these factors. When treating patients for the same condition, those with preexisting or confounding health conditions may require more intensive treatment than patients without preexisting health problems. For example, diabetic patients admitted for acute myocardial infarction may require more intensive treatment and have a lower probability of survival than patients without diabetes. As such, in assessing the impact of health insurance, individual heterogeneity will affect treatment and outcome. To eliminate the problem …