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  5. Healthcare Costs and Consequences: Markets and Policy
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Healthcare Costs and Consequences: Markets and Policy

Paper Session

Friday, Jan. 5, 2024 12:30 PM - 2:15 PM (CST)

Grand Hyatt, Bonham E
Hosted By: Health Economics Research Organization
  • Chair: Kosali Simon, Indiana University

A Bittersweet Jubilee: Evidence on the Effects of Randomized Medical Debt Relief

Raymond Kluender
,
Harvard Business School

Abstract

One in six Americans has unpaid medical debt in collections amounting to more than $140 billion nationally, yet there is limited understanding of its impacts on households. We analyze the effects of randomized medical debt relief totaling $175 million across more than 80,000 households using three data sources: (1) administrative data on future debt sent to collections; (2) quarterly credit report data spanning at least two years before and after debt relief; and, (3) survey measures of self-reported health (clinically-validated screenings for depression, anxiety, and general health), health care utilization, and financial well-being elicited one year after treatment. We detect no significant effects of debt relief on credit score or access to credit, and no effects on mental or general health 12 months after the intervention. We estimate an increase in future medical bills sent to collections by the original health care provider, which are not reported to credit bureaus. This increase in future medical collections was driven by lower repayment rather than increased utilization. We also find that larger amounts of debt relief were associated with larger negative effects on mental health. A subtreatment increasing the salience of the intervention amplified awareness of the debt relief and resulted in worse self-reported mental health. Together, our results imply that one-time reductions of an individual's stock of medical debt has limited benefits, particularly for individuals facing a continued flow of health expenditures that are unmitigated by health insurance. We discuss implications of the results for our understanding of the consequences of the health care system for patient well-being and the economics of debt relief more broadly.

Who Pays for Health Care Costs? The Effects of Health Care Prices on Wages

Christopher Whaley
,
RAND Corporation

Abstract

Over 150 million Americans receive health insurance benefits from an employer as a form of compensation. In recent years, health care costs have grown rapidly, raising concerns that increased health care spending crowds-out wage increases. We leverage geographic variation in health care price growth caused by changes in hospital market structure, and in particular, hospital mergers, to test the impact of health care prices on wages and insurance benefit design. We use a difference-in-difference approach to test the effects of hospital mergers on hospital prices, wages for workers with employer sponsored insurance, and high deductible health plan (HDHP) enrollment. We separately examine the impacts of within- and cross-market hospital mergers. We also applied dynamic event study approach to account for staggered treatment timing and treatment heterogeneity.

To examine this question, we use nationally representative sample of the American Community Survey and data from the Health Care Cost Institute on hospital prices and insurance benefit design. We find that hospital mergers lead to a $521 increase in average hospital prices, a $579 increase in hospital spending per privately insured enrollee and a similar, $633 reduction in wages among workers with private health insurance. We also find evidence of changes in benefit design structure and adoption of high-deductible health plans (HDHPs). Specifically, we estimate that the mean increase in hospital service spending arising from mergers to be associated with a 2.7 percentage point increase in the likelihood of HDHP enrollment and a $17 - $72 increase in patient cost sharing.

Our results show how rising health care costs caused by provider concentration are passed to workers in the form of lower wages and less generous benefits. Due to the unique way in which health care is financed for many Americans, recent changes to health care markets have broad-reaching impacts. Our results suggest

Regulating Vertical Relationships in Prescription Drug Markets: Evidence from Medicaid

Eric Yde
,
University of Virginia

Abstract

Pharmacy benefit managers (PBMs) are third-party administrators of prescription drug programs for health insurance plans. They play a crucial role in the healthcare system by negotiating drug prices with pharmacies. Consequently, their payment structure can significantly affect the price of prescription drugs. I study the price effects of requiring PBMs and insurers to replace their default fixed-price contracts with cost-plus contracts. Using difference-in-differences methods, I find that Medicaid pre-rebate drug prices declined by an average of 15% in states that prohibited fixed-price contracting, but with heterogeneity across states. I show that these findings are consistent with a bargaining model where, in equilibrium, cost-plus contracting reduces incentives for PBMs to exert effort in negotiating reimbursement with pharmacies, but also reduces their ability to profit off of asymmetric information when negotiating compensation with insurers. In markets where these informational rents are large, cost-plus contracts may be an effective means of reducing drug spending.

Winners and Losers of Entry Deregulation: Evidence from Ambulatory Surgery Centers

Anthony Yu
,
Harvard University

Abstract

Abstract Rising hospital costs in the U.S. have led states to deregulate entry of cheaper non-hospital providers, such as ambulatory surgery centers (ASCs). However, cost savings from entry deregulation may lead to increased moral hazard and decreased quality and convenience. I study deregulation in the context of Medicare and a reform to Missouri’s Certificate of Need law, which relaxed entry restrictions on ASCs. Using a difference-in-differences strategy, I estimate the impact of deregulation, finding that the reform increased the number of ASCs in high-income urban areas by 58%. Typical ASC procedures, such as cataract surgeries and colonoscopies, shifted to ASCs, but overall utilization across all settings did not increase. Patients benefited somewhat from lower travel distances and faced similar complication rates despite seeing less experienced physicians. I then develop and estimate a structural model of procedure demand to recover consumer welfare. Counterfactual simulations indicate that changes to consumer welfare were small relative to the effects on reimbursement, suggesting deregulation primarily redistributed rents from hospitals to physicians and Medicare

Discussant(s)
Tal Gross
,
Boston University
Vivian Ho
,
Rice University
Luca Maini
,
Harvard University
Benjamin Chartock
,
Bentley College
JEL Classifications
  • I1 - Health
  • H1 - Structure and Scope of Government