Impact of Housing Subsidy Bias on Medicare
Compensation for Physicians in Puerto Rico
Dr. Mario Marazzi-Santiago
Executive Director
Puerto Rico Institute of Statistics
Population of Puerto Rico (Millions of people) 4.5 4 3.5 3 2.5 2 Population decline between 2004 and 2014, accumulating
to a decline of 7.3% (so far) in 10 consecutive years, first
ever in recorded history since perhaps the Taino genocide
(1492-1518).
1.5 1 0.5 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 One estimate of how many of the
emigrants are doctors
•  According to the Public Use Microdata Sample
(PUMS) of the American Community Survey of
2011, 310 doctors moved from Puerto Rico to
the United States during calendar year 2011.
•  That is almost 1 doctor per day.
•  This estimate has a relatively large confidence
interval: with 90% probability the true number
is as low as 135 doctors to as high as 485 doctors.
Impact of Housing Subsidy Bias on Medicare
Compensation for Physicians in Puerto Rico
ONE REASON DOCTORS MIGHT
LEAVE
Geographic Practice Cost Indexes
(GPCIs)
•  GPCIs are calculated in different ways using
varying data sources.
•  GPCI data sources have changed over time.
•  Puerto Rico has the lowest GPCIs
among all 89 payment localities.
Sources of data for GPCIs
GPCI components
Source of data
Physician Work (PW) GPCI
Occupational Employment Statistics
– BLS/DTRH
Practice Expense (PE) GPCI
Employee Wage
Occupational Employment Statistics
– BLS/DTRH
Purchased Services
Occupational Employment Statistics
– BLS/DTRH
Office Rent
American/P.R. Community Surveys
– U.S. Census Bureau
Equipment, Supplies, etc.
Equals 1.00 for all counties
Malpractice Premium (MP)
GPCI
Malpractice Premiums– State
Insurance Commissioner Data
Sources of data for GPCIs
GPCI components
Source of data
Physician Work (PW) GPCI
Occupational Employment Statistics
– BLS/DTRH
Practice Expense (PE) GPCI
Employee Wage
Occupational Employment Statistics
– BLS/DTRH
Purchased Services
Occupational Employment Statistics
– BLS/DTRH
Office Rent
American/P.R. Community Surveys
– U.S. Census Bureau
Equipment, Supplies, etc.
Equals 1.00 for all counties
Malpractice Premium (MP)
GPCI
Malpractice Premiums– State
Insurance Commissioner Data
Malpractice Premium GPCI
•  In 2012-13, the Puerto Rico Institute of
Statistics requested the Puerto Rico State
Insurance Commissioner provide up-todate malpractice premium data to improve
the accuracy of the Malpractice Premium
(MP) GPCI.
⇒ the MP GPCI of Puerto Rico increased
18%.
Sources of data for GPCIs
GPCI components
Source of data
Physician Work (PW) GPCI
Occupational Employment Statistics
– BLS/DTRH
Practice Expense (PE) GPCI
Employee Wage
Occupational Employment Statistics
– BLS/DTRH
Purchased Services
Occupational Employment Statistics
– BLS/DTRH
Office Rent
American/P.R. Community Surveys
– U.S. Census Bureau
Equipment, Supplies, etc.
Equals 1.00 for all counties
Malpractice Premium (MP)
GPCI
Malpractice Premiums– State
Insurance Commissioner Data
Office Rent component of PE GPCI
•  The Median Gross Rent of a 2 bedroom
apartment (including energy costs) from
the American/Puerto Rico Community
Surveys in each location is used as a proxy
for the rent of a doctor's office.
•  To the extent the error of this proxy is
approximately constant over locations,
then the use of this proxy might make
some sense.
Housing Subsidy Bias
•  Housing subsidies tend to depress
apartment rents.
•  When a greater percentage of
housing units are subsidized, then
one would expect apartment rents
to be lower.
Median Gross Rent
$1,600
Housing Subsidy Bias
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
0%
2%
4%
6%
8%
10%
12%
14%
16%
% of renters who receive HUD Section 8 subsidy
Median Gross Rent
$1,600
Housing Subsidy Bias
$1,400
$1,200
$1,000
$800
Puerto Rico
$600
$400
$200
$0
0%
2%
4%
6%
8%
10%
12%
14%
16%
% of renters who receive HUD Section 8 subsidy
Housing Subsidy Bias
Consistent with Hypothesis:
The bias of using apartment rents as a
proxy for the rent of a doctor's office is
larger in jurisdictions with a higher
proportion of HUD-subsidized (Section 8)
apartments.
Solution #1
•  Re-estimate Median Gross Rent excluding
households that receive Nutritional Assistance
(PAN), using the American Community Survey.
•  This Survey does not ask whether renters are
receiving Section 8 housing subsidy. So, we use
the presence of nutritional assistance as a proxy
for the housing subsidy: Households that receive
nutritional assistance are more likely to receive a
housing subsidy.
•  A preliminary analysis suggests the possibility that
the median gross rent of Puerto Rico would rise
21%.
Solution #2
•  Use apartment and energy components of
new Cost-of-Living Index (COLI) for San
Juan Metro Area:
§  Principle source of data to compare the
relative cost of living amongst 300 cities and
urban areas of the United States, and now
Puerto Rico.
§  Published since 1968 by the Council for
Community and Economic Research (C2ER),
based in Arlington, Virginia.
Solution #2
•  COLI includes prices for the rent paid by a
2 bedroom apartment and for the energy
costs of keeping the apartment.
3rd Quarter
San Juan
U.S.
•  Asdf
2014
MSA
(median)
•  Asdf Rent
Monthly
$858
$818
•  Asdf
Monthly
Energy
$445
$160
•  Asdf
$1,303
$978
Total
•  Total costs in San Juan are 33% higher.
Thank You