Competition and Productivity in Health Care Markets
Paper Session
Saturday, Jan. 7, 2023 10:15 AM - 12:15 PM (CST)
- Chair: Kate Bundorf, Duke University
What Does a Public Option Do? Evidence from California
Abstract
Stimulating competition in health insurance markets as a mechanism for expanding health care access has been a longstanding objective of U.S. health care policy. One of the leading proposals for enhancing competition is the inclusion of a ``public option'' that competes with private insurance firms.In this paper, we study how a public option affects the market equilibrium. A thorough analysis of the public option is challenging because it requires understanding how (1) consumers value public plans relative to plans sold by private firms and (2) the public firm will price. Our study overcomes these challenges by exploiting consumer-level data from the California ACA exchange where some, but not all consumers have access to a public option sold by their county governments. Heterogeneity in exposure to the public option across county markets and time provides identifying variation.
We estimate consumers' valuation of the public option. We find consumers are willing to pay an average of $39 more in premiums (9.5% of the average premium) for a private plan relative to a public plan, controlling for observables such as premiums and plan generosity. This average masks substantial heterogeneity; older, higher-income, and non-Hispanic White consumers have a much higher willingness-to-pay for a private plan.
We evaluate how well alternative objective functions for the public firm reconcile with our data. We consider several public firm objectives, including maximization of weighted social welfare. We find the public firm places substantial weight on consumer welfare, particularly that of disadvantaged subpopulations.
Finally, we find the public option reduces premiums & enhances social welfare. Product differentiation allows the market to support both public and private firms. Our work therefore provides support for the public option as a means of stimulating competition in health insurance.
The Corporatization of Hospital Care
Abstract
Between 2000 and 2020, the share of US hospital capacity at independent hospitals dropped by half – a rapid corporatization of hospital care. The welfare effects of corporate ownership are theoretically ambiguous, leading to an important policy debate. We study this question using novel, patient-level claims data from one of the largest commercial health insurance firms in the US and the universe of hospital discharges from New York. We study 117 hospital deals between 2012 and 2018 using staggered differences-in-differences, comparing trends for independent hospitals newly acquired by systems to hospitals that remained independent. System ownership increases the revenue of the acquired hospital through both higher prices and greater treatment intensity, while simultaneously reducing operating expenses and staffing levels. However, we also detect a robust increase in hospital-wide readmission rates, suggesting a potential trade-off between efficiency and quality. We estimate that the increase in operating efficiency outweighs the cost to society of the quality decline across a range of estimates.The Productivity of Professions: Evidence from the Emergency Department
Abstract
Professions play a key role in determining the division of labor and the returns to work. This paper studies the productivity difference between two distinct professions performing the same job---physicians and nurse practitioners (NPs)---but with stark differences in training and pay. Using data from the Veterans Health Administration and quasi-random variation in patient probability of being treated by physicians versus NPs in the emergency department, we find that, compared to physicians, NPs significantly increase patient length of stay (by 11 percent) and medical costs (by 7 percent). Despite higher medical resource use, NPs achieve less favorable patient outcomes: they increase patient 30-day preventable hospitalization rate by 20 percent. In unpacking mechanisms, we find evidence suggesting channels related to lower human capital among NPs relative to physicians, including that: lower experience widens the NP performance gap relative to physicians, NPs exhibit prescription thresholds consistent with lower skill, and NPs are likelier to gather information from external sources than are physicians. Finally, our estimation suggests a net increase in medical costs with the use of NPs, even if accounting for NP salaries that are half as much as physician salaries.Discussant(s)
Shooshan Danagoulian
,
Wayne State University
W. David Bradford
,
University of Georgia
Michael Chernew
,
Harvard University
Stuart Craig
,
Yale University
JEL Classifications
- I1 - Health