Olin School of Business professors examine the economics of infertility treatments

Oct. 5, 2005 -- After months of unsuccessfully trying to get pregnant, couples may turn to Assisted Reproductive Technology, or ART, to help overcome their infertility. However, at $10,000 - $15,000 for each round of treatments, access to ART is restricted to a relatively small portion of couples that seek it. Several state governments have turned to public policy in an attempt to make access to ART more widely available. But two professors from the Olin School of Business at Washington University in St. Louis find that market competition can be as effective at expanding access as requiring insurance companies to cover infertility treatments. At the same time, competition appears to lower the rate of high-risk births and encourages the use of new technologies.

Infertility is increasingly recognized as a medical problem that some believe should be treated as any other medical problem. About 10 to 15 percent of U.S. couples are infertile and 1 percent of all babies born in the U.S. are the result of ART. Several states have begun requiring that insurance companies either offer the option of coverage. Nine states mandate that insurance companies provide coverage of treatments. Olin School of Business professors Bart Hamilton, the Robert Brookings Smith Distinguished Professor of Entrepreneurship, and Brian McManus, assistant professor of economics, studied the effects of mandated coverage versus competition on the market for treatment of in vitro fertilization (IVF), the most common form of ART.

The professors wanted to know how insurance coverage affects the frequency of IVF use and how it affects decisions on how aggressive treatment should be.

"If you're a patient and you know you're getting this coverage for free, you may chose to be less aggressive," Hamilton says. "So instead of transferring three embryos and risking a triplet birth, you decide it's OK to transfer just two. After all, if those two embryos don't take, you can try again at very low cost."

If, however, the patient knows that another cycle of IVF will cost at least another $10,000, then she is more likely to agree to transfer three or more embryos. The problem is that the more embryos are implanted, the higher the likelihood of having triplets or quadruplets or more.

"The cost of a triplet birth is on the order of $250,000," says McManus. "And that's just for the initial medical care. Triplet birth is dangerous for the mother. The average gestation period is 32 or 33 weeks, which means the kids are likely to be born prematurely and they'll need very expensive neo-natal intensive care. There's also the possible expense of having to provide care for the woman as well. So, more aggressive IVF treatment might appear cheaper to patients or clinics in the short run, but the overall social costs of aggressive treatment can be substantial."

Insurance coverage serves as an incentive for people to pursue a more conservative level of treatment, which means fewer multiple births, the professors say. Coverage also draws more people into the market - people who otherwise might have felt that their chances for getting pregnant were simply too low to justify the expense.

In mandating coverage, policy makers were probably striving to make access to IVF more equitable, McManus and Hamilton say. An objective of their research is to use treatment practices and birth rates to infer how the fertility characteristics of typical patients vary across markets with different regulations or amounts of competition.

Bart Hamilton

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"Not surprisingly, we find that on average more infertile couples use IVF when it's covered by insurance than when it's not - and many of the new customers are those women whose infertility is such that the odds of getting pregnant are pretty good," Hamilton says. "What's more, in the three states that have the most generous requirements for insurance coverage, those markets see much greater use of IVF, so the clinics are bigger. We also find that they tend to treat patients less aggressively in that they transfer fewer embryos. We also find that there are fewer multiple births among patients who reside in those markets."

Mandating coverage isn't the only way to make IVF more accessible, less expensive and result in fewer multiple births, Hamilton and McManus find.

Competition can have the same effect.

"Competition has a similar effect on access to IVF that insurance mandates did," Hamilton says. "In markets that are more competitive, prices will be lower, which again gives you some incentive to be more conservative in your treatment knowing it's going to cost you less if you have to do it again."

The findings are similar to what happens in other health care contexts as well. The professors say one would expect competition to mean each clinic tries to outdo its rivals by promising better results. For example, clinics might try to achieve higher birth rates by being overly aggressive in transferring embryos. However, the professors say that this sort of one-upsmanship does not seem to occur.

"We argue that in more competitive markets, prices will be lower," Hamilton says. "This actually acts as an incentive to be more conservative in your treatment because you know that if it doesn't work the first time, you can actually afford to pay for another round." As for clinics that might try to attract patients with birth rates inflated by aggressive treatment practices, Hamilton and McManus believe that potential patients are likely to be too savvy to be fooled in this way. The empirical evidence simply does not support this criticism of competition.

McManus adds, "in competitive markets, competition had a similar effect on access to IVF that insurance mandates did. But, unlike insurance coverage, in competitive markets clinics are more likely to adopt new technology in fertility that could improve the prospect of a birth even further."