Three Essays in Health Economics and Industrial Organization
This dissertation consists of three essays in the field of health economics and industrial organization, focusing on the policies on public health insurance in the United States. The first chapter investigates the impact of expanding public health insurance through private insurers on equilibrium insurance market outcomes. Using the Arkansas All-Payer Claims Database, I measure the impact of the Affordable Care Act (ACA) insurance expansions on hospital reimbursement rates and premiums for non-ACA private plans, including employer-sponsored insurance plans not directly affected by the ACA. Using a Nash bargaining model based on the Ho and Lee (2017) framework, I find that the publicly-subsidized expansion decreases hospital reimbursement rates by 5.3% and insurance premiums by 0.6% for privately-insured enrollees who are not covered by the ACA. This spillover effect on reimbursement rates is driven by the increased bargaining leverage of insurers participating in the expansion. The increase in leverage results mainly from the change in the composition of enrollees, which goes hand-in-hand with enrollment increase as a result of the expansion. The second chapter, co-authored with Claire Lim, explores the linkages between government ideology in U.S. states and geographic variation in Medicaid program design and operations. Medicaid eligibility criteria tend to be more generous in liberal states. Simultaneously, fee-for-service reimbursement rates for physician services have been notably lower in liberal states. These two patterns lead to the following question: to what extent does the partisan composition of the government drive eligibility and reimbursement over time? If cost-saving measures accompany eligibility expansion, then what are their consequences for resource allocation? We explore long-run linkages among partisan composition of the government, eligibility, cost-saving measures, and expenditures for the Medicaid expansion from the mid-1990s to 2010. Our analysis consists of four steps. First, we analyze how much the partisan composition of the state government drives eligibility expansion. Second, we explore the tradeoff between breadth of eligibility and fee-for-service reimbursement rates. Third, we investigate driving forces behind the evolution of the delivery systems, i.e., Medicaid managed care diffusion. Fourth, we analyze the resulting patterns of per-enrollee spending. We find that the partisan composition of the state house played a critical role in the relatively later stage of eligibility expansion and the reduction of fee-for-service reimbursement rates over time. While the HMO penetration in the private insurance market drove the Medicaid managed care diffusion, the diffusion also tends to go hand in hand with the reduction of fee-for-service reimbursement rates. Finally, Medicaid per-enrollee spending increased substantially over time despite the adoption of cost-saving measures. This unintended consequence was due to the systematic changes in HMO practices that coincided with the eligibility expansion. The third chapter, co-authored with Claire Lim, investigates determinants of government subsidy in the U.S. health care industry, focusing on the Medicaid Disproportionate Share Hospital (DSH) program. We find that the amount of Medicaid DSH payment per bed increases significantly with increase in hospital size for government hospitals. This is partially explained by the distinctive role that large government hospitals play in the provision of care to the indigent population. However, costs, financial conditions, or types of services by themselves are not enough to explain DSH payments. Large government hospitals tend to have a higher ratio of DSH payments to Medicaid and uninsured costs. The difference in the DSH payment-to-cost ratio across ownership types increases significantly with increase in hospital size. We argue that these key patterns are unlikely to be driven by unobserved heterogeneity, using the Altonji-Elder-Taber-Oster method. Our results on payment-to-cost ratios are consistent with targeting by the state government to counterbalance disparities in hospitals’ capability to cross-subsidize across patient types.
American health insurance; Disproportionate Share Hospital program; health care markets; Medicaid; public health insurance; the Affordable Care Act
Nicholson, Sean; Hoe, Thomas; Lim, Seon Hye
Ph. D., Economics
Doctor of Philosophy
dissertation or thesis