Faculty Research Speaker Series

Timothy J. Layton

30th Anniversary Associate Professor of Health Care Policy, Harvard
Adverse Selection and Insurer Participation in Health Insurance Markets
Nov 05, 2021 12:00PM

Timothy Layton, PhD, is an associate professor of health care policy at HCP. His research focuses on the economics of health insurance markets with particular emphasis on understanding insurer behavior in those markets and designing optimal health plan payment systems. 

Dr. Layton and his collaborators are using economic models of health insurer behavior to design payment systems that combat inefficiencies caused by adverse selection. In one project, he and his coauthors are deriving new methods for designing health plan payment systems that set payments to insurers in a way that discourages insurers from inefficiently rationing care used by sick individuals with multiple chronic conditions. This work focuses on designing payment systems for the state and federal Health Insurance Marketplaces, as well as the Dutch health insurance market and the Medicare Advantage program.

Dr. Layton’s work also focuses on problems with existing payment systems. In an extensive project, he and Dr. Michael Geruso are studying insurer upcoding behavior in the Medicare Advantage program, where insurers are paid more for enrollees who have received diagnoses for more chronic conditions. They find that differential coding patterns between Medicare Advantage plans and Traditional Fee-for-Service Medicare result in excess payments of around $640 per Medicare Advantage enrollee per year, if uncorrected. Dr. Layton is also working with Dr. Geruso on a project studying whether the risk adjustment system in the state and federal Health Insurance Marketplaces adequately discourages insurers from discriminating against sick consumers whose treatment includes expensive prescription drugs. They are currently using a unique dataset including prescription drug formularies for all Marketplace plans as well as many employer plans to determine whether patterns of formulary generosity correspond to the insurer’s incentive to provide insufficient coverage for drugs used by the sickest Marketplace enrollees. 

In other work, Dr. Layton is studying consumer choice in the state and federal Marketplaces. Specifically, along with his coauthors, he is running a large randomized controlled trial to determine whether personalized information about cost savings induces plan switching among previously enrolled Marketplace enrollees.

Finally, Dr. Layton is currently focusing his research on Medicaid Managed Care. CMS reports that around 80% of Medicaid enrollees are served through managed care delivery systems. However, little is known about how these Medicaid Managed Care arrangements function. Using detailed administrative claims data from New York State’s Medicaid program, Dr. Layton and his collaborators are studying a variety of questions related to the economics of Medicaid Managed Care markets. Specifically, they are exploiting random assignment of beneficiaries to managed care plans to understand how plan choice affects the care beneficiaries receive. They are also studying how private managed care plans compete with the public fee-for-service program when beneficiaries are given the option to enroll in either type of plan. Finally, they are studying differences between Medicaid Managed Care, commercial, and Medicare Advantage plan provider networks to better understand how access to specialists differs across these three market segments. 

Dr. Layton is the recipient of the 2014 Mark A. Satterthwaite Award for Outstanding Research in Healthcare Markets from the Kellogg School of Management at Northwestern University. As of May 1, 2017, he was appointed Faculty Research Fellow at the NBER. He has been quoted or cited in The New York TimesThe Washington PostBloomberg BusinessNPRModern HealthcarePolitico, and the AcademyHealth blog.