The Impact of Alternative Types of Post-Acute Medical Care: Stratified IV Analysis Using Nursing Home Exits
[Job Market Paper]
Approximately 40% of Medicare-covered inpatient hospitalizations are followed with post-acute care, mostly provided by home health services, nursing homes, and inpatient rehabilitation facilities. Despite substantial overlap in patient characteristics, these providers are reimbursed at very different rates according to expected care intensity, making the utilization of post-acute care a major driver of unexplained geographic variation in US health care spending. This paper compares the quality and cost of post-acute care across provider types, instrumenting with hospital-nursing home vertical disintegration to overcome selection bias. My results show that the termination of hospital-affiliated nursing homes increases the likelihood of both home health care and inpatient rehab, with the former a less intensive type of care and the latter a more intensive type of care. To address the violation of monotonicity in this multiple treatment setting, I propose stratified instrumental variables based on conditional first stage effects estimated with machine learning. My results demonstrate that compliers who switch from nursing homes to home care experience no change in health outcomes or other health care treatments, while those who switch from nursing homes to inpatient rehab cost Medicare twice as much with no improvement in health outcomes.
The Economic Impact of Healthcare Quality
IMF Working Paper No. 19/173, August 2019
We study the costs of hospitalizations on patients' earnings and labor supply, using the universe of hospital admissions in Denmark and full-population tax data. We evaluate the quality of treatment based on its ability to mitigate the labor market consequences of a given diagnosis and propose a new measure of hospital quality, the "Adjusted Earning Losses" (AEL). We document a sizeable heterogeneity in quality across Danish hospitals: AEL standard deviation is equal to approximately 10% of the average decline in labor earnings following a hospital admission. We show that AEL contains significant additional information relative to traditional measures and does not suffer from worse selection issues. We also document a large decline in the labor cost of hospitalizations over time, with large variations across diseases. We find that the average post-hospitalization reduction in labor earnings declined by 25% (50%) on the intensive (extensive) margin between 1998 and 2012.
Work in Progress
The Impact of Private Contracting on Health Care for the Disabled: Evidence from California's Medicaid Program
State governments face the classic "make or buy" decision for the provision of Medicaid services. Over the past two decades, the majority of states have outsourced the provision of social insurance through Medicaid Managed Care (MMC) programs. These programs have been extensively studied in the literature, with little evidence of large positive or negative effects. However, most states allowed older and sicker enrollees to remain enrolled in the government run fee for service (FFS) programs. It is possible that these more fragile enrollees could have a different experience in managed care. In this paper we study California's mandatory enrollment of the senior and persons with disabilities (SPD) population in MMC. We find this mandatory enrollment caused an increased use of the emergency department and transfers between hospitals. This was not simply a hassle cost for enrollees. We also estimate an increase in mortality for the affected population. These effects were strongest for enrollees who had the greatest use of medical services prior to enrollment in MMC, the types of enrollees that might be expected to have a different experience with managed care. Our results suggest the adverse impact of MMC varies by the health of enrollees, which should inform the optimal outsourcing decision for governments.
Who Makes an Active Choice? Testing Models of Default Effects in Medicare Part D
We study decision-making among low-income beneficiaries of Medicare Part D, documenting a new stylized fact: Only 16% of beneficiaries make an active choice of insurance plan when they initially qualify, with the rest instead receiving the default, a randomly-assigned plan. We find that these default assignments are persistent, with only one-third of randomly-assigned beneficiaries having actively chosen to switch out of their plan after five years of enrollment. This dynamic persistence is driven by inattention rather than adaptation: 92% of assigned beneficiaries switch plans when their default quasi-randomly changes from remaining in their plan to being reassigned to a random plan. Beneficiaries respond to poor plan assignment fit by substantially reducing their drug consumption and consequentially see increases in their use of hospital services. Those who face the greatest risk of these consequences are not more likely to make active decisions, ex ante or ex post. Our results are inconsistent with the class of boundedly-rational models of choice commonly used in the literature, and raise concerns about the ability of market-based insurance provision to efficiently elicit beneficiary preferences.