What is the wait worth? Early elective deliveries, procedure use & neonatal health

U.S. health expenditure has consistently been the highest in the world. However, this significant spending is not reflected in better health outcomes. On the contrary, many health indicators suggest that the U.S. ranks worse than other developed countries, with some of these indicators including life expectancy at birth, infant mortality, and fraction of low-birth-weight newborns. Taken together, these facts point to the existence of significant inefficiencies in the provision of healthcare in the U.S. One particular channel of wasteful spending is the performance of unnecessary procedures. According to recent estimates, around 8 cents of every dollar spent on healthcare covers treatment than can be classified as “medically unnecessary”. In the context of childbirth, a particular concern is the rising number of elective (or non-medically necessary) deliveries before the completion of full term. Using a statewide policy as a quasi-experiment, this study examines whether initiatives to curb early elective deliveries can reduce costs without negatively affecting health outcomes. Legislative changes calling for the elimination of early elective deliveries were applied to all births in Texas. In addition, Texas Medicaid discontinued reimbursement for such deliveries unless they were documented as medically necessary. A comparison between Texas and a set of control states reveals that the initiative successfully restricted early elective deliveries across both the Medicaid and non-Medicaid populations. However, as expected, the impact was of a larger magnitude among Medicaid-covered births – 18% versus 6% – due to the stringency of the policy for that group. As for procedure use, inductions of labor – the less treatment intensive and less costly version of scheduled births – responded in the expected manner. They declined significantly across both treated populations. However, two unexpected results emerge for scheduled C-sections. They remained unchanged across Medicaid-covered births and rose significantly among non-Medicaid patients. I find that the increased use of C-sections was driven primarily by hospitals more strongly impacted by the intervention (for example, hospitals with a large fraction of birth-related discharges). Additionally, I document newborn health improvements, as measured by birth weight gains, only among the Medicaid population of newborns. In the aggregate, the medical cost reductions for Medicaid were more than offset by cost increases incurred by the non-Medicaid population. From a policy perspective, my findings underline the potential of such interventions to reduce costs while improving health outcomes, but also call attention to the possibility of unintended physician and hospital response to tighter regulations.