Can Competitive Bidding Work in Health Care? Evidence from Medicare Durable Medical Equipment. (January 2023)
As of January 1, 2021, the Centers for Medicare & Medicaid Services (CMS) required all US acute care hospitals to release the prices they negotiate with insurance plans to make price comparison across hospitals easier for consumers. We report data on compliance with this requirement for all 4484 acute care hospitals in the US as of December 2021 and explore the association between hospital characteristics and compliance.
Voluntary Regulation: Evidence from Medicare Payment Reform
Government programs are often offered on an optional basis to market participants. We explore the economics of such voluntary regulation in the context of a Medicare payment reform, in which one medical provider receives a single, predetermined payment for a sequence of related healthcare services, instead of separate service-specific payments. This “bundled payment” program was originally implemented as a 5-year randomized trial, with mandatory participation by hospitals assigned to the new payment model; however, after two years, participation was made voluntary for half of these hospitals. Using detailed claim-level data, we document that voluntary participation is more likely for hospitals that can increase revenue without changing behavior (“selection on levels”) and for hospitals that had large changes in behavior when participation was mandatory (“selection on slopes”). To assess outcomes under counterfactual regimes, we estimate a stylized model of responsiveness to and selection into the program. We find that the current voluntary regime generates inefficient transfers to hospitals, and that alternative (feasible) designs could reduce these inefficient transfers and raise welfare. Our analysis highlights key design elements to consider under voluntary regulation.
Changes in the way health insurers pay healthcare providers may not only directly affect the insurer’s patients but may also affect patients covered by other insurers. We provide evidence of such spillovers in the context of a nationwide Medicare bundled payment reform that was implemented in some areas of the country but not in others, via random assignment. We estimate that the payment reform—which targeted traditional Medicare patients—had effects of similar magnitude on the healthcare experience of nontargeted, privately insured Medicare Advantage patients. We discuss the implications of these findings for estimates of the impact of healthcare payment reforms and more generally for the design of healthcare policy.
Health Care Spending, Utilization, and Quality 8 Years into Global Payment
Do opportunities to punish non-punishers help to stabilize cooperation? Or do opportunities to punish punishers harm cooperation and its benefits by deterring first order punishment and wasting resources? We compare treatments of a decision experiment without peer punishment and with one order of punishment to ones in which subjects can be punished for punishing or for failing to punish. Our treatments with higher-order punishment achieve as much improvement in cooperation as those with only one punishment stage. We see evidence of social norms in action, but no evidence of punishing failure to punish. These results suggest that higher-order punishment is neither critical to nor a major deterrent to cooperation.
Selected Research Papers in Progress
We study how government price reforms affect innovation and welfare in the health care sector. We exploit a Medicare payment reform that effectively reduced the reimbursement price for certain types of durable medical equipment (DME) by 45% but left other DME types unchanged. Using DME patents and the FDA medical device database, we find that manufacturers filed fewer patents and introduced fewer new models in DME types affected by the price cut compared to those unaffected. Text analysis of the patent documents suggests that patents filed after the price cut were more likely to emphasize cost efficiency relative to the control. However, reported device breakage and adverse events also increased relative to the control. These effects were largely driven by increased contracting with foreign manufacturers, which tend to be lower cost but also lower quality. While price regulation in health care can effectively reduce spending, our results show that welfare gains from these savings can be offset by reduced innovation and product quality in the longer term. Our analysis highlights the importance of incorporating long-run dynamics into policy decisions.
The Effect of Deregulation on the Cost, Availability, and Quality of Health Care
We study the effects of FDA regulation on the cost, availability, and quality of health care. Our analysis exploits a deregulation event that removed pre-market testing requirements for over 250 medical device types. We leverage rich, transaction-level data on device purchases made by healthcare providers, as well as claims for medical procedures performed using purchased devices. We first consider the effects of deregulation on the prices, quantities, and characteristics of devices purchased and procedures performed. We then consider the implications for healthcare access and patient health. Our results will shed light on how government regulation affects the interactions between the key players in the healthcare supply chain, and how these interactions contribute to healthcare costs, quality, and accessibility in the United States.