In public service delivery, expanding upon existing consumer choices is central to the wider principles of recent service reforms in the Swedish elderly care sector [1], British health care sector [2], American education and health sectors [3, 4], and Korean social service sector [5, 6]. Such reforms aim to improve not only providers’ efficiency but also their responsiveness to public service users, which can be modified to better satisfy the requirements of consumer sovereignty [3, 7]. However, conceptualizing and measuring the value of consumer choices is problematic in both theory and practice because the criteria to determine whether a choice is welfare-enhancing are rarely suggested [8].
The Medicaid system in the United States is a consumer-driven purchasing policy that provides a mechanism for state and local governments to provide services in a manner that enhances consumer choices and improves the purchasing relationship between the government, providers, and consumers. Accordingly, patients are given a Medicaid entitlement that they can present at a hospital of their choosing to receive government-provided health insurance funds that align with their choice [2, 3]. This study explored whether Medicaid can broaden patients’ choice of hospitals because Medicaid patients can use their purchasing power to pit hospitals against each other, and thus receive higher quality services [3, 7]. However, while the natural motivation for such programs is to improve the health of lower-income persons [9], little research has been conducted to determine whether offering greater purchasing power for choices through existing health markets contributes to equity in accessing services; moreover, the existing programs are poorly documented in the public administration field.
There are concerns that increasing consumer-directed purchasing power may worsen equity—or at least not alleviate existing inequity—in accessing services, despite increasing the efficiency and responsiveness of health services. Even tools that offer consumer-directed purchasing power at subsidized prices, or no additional charge, involve distribution issues, as there may be non-monetary barriers—such as lack of information or poor local facilities—that impede access by different groups of patients [2, 10]. Disadvantaged citizens tend to be left behind in terms of their access to the market-oriented provision of public services.
Therefore, this study aimed to not only investigate the current differences in health service accessibility between vulnerable consumers and others in terms of the geographic range of hospitals available to them, but also determine how such customers are affected by Medicaid. The findings can help to clarify whether demand-driven choices can change the existing inequities.
We analyzed patients’ bypassing behaviors in Brooklyn, a borough of New York City in the United States. This was based on three reasons. First, there are substantial inequities within the current American health care markets [11]. Research has shown a relationship between health outcomes and socioeconomic status (SES). Moreover, coronary heart disease (CHD) and stroke (both incidence and mortality) are known to be higher among people and communities with lower SES [12, 13]. Second, New York State has a history of being relatively liberal in expanding Medicaid eligibility, compared to some other states, partly due to the eagerness of state officials to avail themselves of federal funds [14]. Nonetheless, this commitment to providing generous health and social welfare benefits has had a decisive impact, not only on the scope and structure of the Medicaid program but also on the regulation of private health insurance [14, 15]. Third, within New York State, New York City is particularly interesting because of the large number of hospital facilities (it has the largest public hospital system in the United States). It has, by far, the largest population of any municipality within the state and, in 2007, 62% of the state’s Medicaid hospitalizations occurred in New York City [16, p. 1]. Within the city, Brooklyn is interesting, because its CHD mortality rate in 1999 was over 30% higher than the state’s average [12, p. 41], while its overall CHD hospitalization rate for 2000, at 72 per 10,000 residents, was slightly below the statewide rate of 75 per 10,000 [12, p. 73]—statistics that imply either a large annual variability or a delay in early hospitalization. Among all the city’s boroughs, Brooklyn also has the highest number of residents eligible for but not covered by Medicaid [12].
Therefore, this study also investigated whether those who receive Medicaid benefits extend their hospital choices beyond geographic boundaries. The results will clarify whether such a policy, a type of consumer-directed purchasing tool, diminishes the existing inequities among citizens. The findings may be of interest to administrative and health care policymakers, those researching theories on the choices of public service provision, and those at higher levels of government who are launching policies for lower SES patients.
Literature Review
The Concepts: Offering and Extending Choices
It is important to be clear about key concepts, as much of the debate in this area is characterized by confusing terminology. The measurement of offering and expanding choices is poorly documented and cannot readily be monitored. We differentiate between them as described below.
In terms of public services, the choices offered include the ability to make decisions from among all the various options available, such as choosing among providers (where), professionals (who), services (what), appointment times (when), and access channels (how) [17]. From an economic perspective, these choices are driven by both the supply and demand sides. For supply-driven choices, counting the alternatives measures the number of choices that exist, although, as Dowding and John [8] note, measuring by counting the alternatives seems counterintuitive, because a smaller set of better or more diverse alternatives seems to provide more choice than one that is simply larger. For demand-driven policy, a voucher program is a scheme that facilitates consumer purchasing power by providing subsidies to poor families. Dixon and Le Grand [17] posit that Medicaid—a government health insurance program that provides health care vouchers to low-income families and individuals—is a classic example of a program offering choices in the United States. A hospital will then redeem a voucher with the health department of the relevant government and, in return, receive a payment from public financial funds. Thus, this study concentrated primarily on Medicaid and patient choices under this program to conceptualize choices driven by purchasing power. Consequently, this article defines “choices” as the ability of patients to decide among an increased number of hospitals based on their affordability through Medicaid entitlements. This is because increased financial resources may allow patients to compensate for not only their medical costs but also their information search costs or switching costs when deciding among more choices than they would have had access to previously.
Therefore, to measure the value of increasing choices from a patient perspective, we derived insights based on bypassing behaviors concerning health administration. Bypassing behaviors refer to patients bypassing a nearby hospital in favor of one further away to seek better health care services outside their local community. This has been employed in many research studies on health policies in Europe [18] and the United States [19, 20]. Bypassing behaviors in densely populated urban locations compared to rural locations have received relatively less research attention, although they continue to be analyzed in many studies [21, 22]. Overall, the research on this topic reflects the likelihood of patients to bypass the nearest hospitals to receive appropriate care elsewhere because of the perceived quality of care and services available at other hospitals [23, 24]. This higher tendency to bypass the closest hospital to one’s residence could reflect a greater willingness to travel for care perceived to be better, rather than spatial access barriers.
The Concept of Inequity
Much of the controversy surrounding policies that offer choices stems from concerns about increasing inequity among citizens. Inequity is a concept that is subject to many interpretations in policy contexts. While it has many possible meanings, our study is congruent with those studies that consider equity as the eliminated consequence of differences between various SES groups [8, 17]. Inequity, therefore, represents the consequences of differences between SES groups. This is because SES embodies an array of resources, such as money, knowledge, prestige, power, and beneficial social connections [25]. This study measured SES in terms of race, gender, and age, but these measurements should be regarded as provisional for various reasons.
The possibility arises that lower SES patients are left behind in the market-oriented provision of public services. This is a crucial concern of the opponents of the choice-movement, which introduced choice to public service delivery. Within the health care sector, these views are ambiguous. Some are concerned that extending choice may increase the efficiency and responsiveness of health services, but will worsen inequity. In exercising their right to choose a better option, patients can incur not only direct choice costs (e.g., distance costs) but also indirect choice costs (e.g., information costs, search costs, or switch costs) that are necessary to experience any benefits from their choices. Indeed, many options may entail information costs so high that increasing choice by adding alternatives actually makes the choice impossible [8]. Switching costs occur when patients need to change their current service provider and pick a new one. Especially for those in vulnerable situations, such as specific groups of patients, the costs of exercising choices also come with the risk of missing the care needed to prevent or maintain certain conditions [26]. People with lower SES have more problems in exercising choices because exercising choice depends on the nature of information that is associated with higher levels of class stratification and racial segregation [27]. Thus, although lower SES patients may obtain choices driven by purchasing power through subsidies that make services affordable, they tend to reap fewer benefits from exercising those choices. With regard to the English National Health Service’s policy to extend patients’ choices of providers, Dixon and Le Grand [17] argued that extending patient choice may leave inequity unchanged due to differences in health beliefs (because choice does not affect these directly) or decrease inequity due to unequal capabilities (because the poor will have access to a new and, for them a more effective, source of leverage over health service professionals).
From these arguments, one can speculate that some patients with fewer resources, such as low SES patients, are unable to bypass the hospitals nearest to them, the way better-educated, middle-class patients can. Indeed, one can outline the idea of the number of hospitals to choose from being too large for low SES patients, compared to other patients, to comprehend adequate information about each alternative to distinguish one from another [8, 27]. However, the extent to which low SES patients navigate smaller geographic choice sets of hospitals in comparison to other patients has not yet been discussed. Thus, our research sought to fill this knowledge gap.
Indeed, to our knowledge, no previous studies suggest the extent to which Medicaid enlarges low SES patients’ choice sets of hospitals through bypassing behaviors, which would allow them to access higher quality services by broadening the geographic range of services, doctors, and hospitals available. However, this is important, as it could assist policy researchers and public administrators in determining whether or how Medicaid significantly influences the choice of hospitals for individuals with low SES in light of geographic access to health services. If Medicaid fails to expand the number of choices for low SES patients, it could lead to public health inequities.
Interestingly, this study highlighted the level of differences between low SES Medicaid and non-Medicaid groups in their choice of hospitals, which may indicate inequities. However, the challenge here is that inequity can be defined by a variety of definitions depending on which dimension is emphasized. In this study, the key dimension considered is the universality of access to a range of services. As it is not easy to capture the real differences in individuals’ bypassing behaviors, we will discuss this issue in detail later on in the text.