Treatment on the Treated

Kevin Lewis

September 13, 2021

Offsetting Policy Feedback Effects: Evidence from the Affordable Care Act
William Hobbs & Daniel Hopkins
Journal of Politics, forthcoming

The US welfare state provides key benefits indirectly. The Affordable Care Act (ACA), for example, uses a package including exchanges, subsidies, and penalties to increase health insurance enrollment. Prior research indicates that indirect policies do not produce feedback effects on public opinion, but the ACA was unusually salient and complex. Can such indirect policies produce feedback effects, and are any such effects heterogeneous? Here, we use several data sets and inferential strategies to show that groups especially affected by the exchanges and the associated insurance mandate did shift their ACA attitudes, albeit in opposing directions and with more limited effects than descriptive analyses suggest. Those who experienced rising local prices became more opposed to the ACA, while those who stood to benefit from some changes to the individual markets became more favorable. Overall, positive changes in attitudes were offset by demographically concentrated, negative shifts among the uninsured. 

Continuous job lock: Employer health insurance contributions and job tenure
James Bailey & Michael Mathes
Applied Economics Letters, forthcoming

We estimate the effect of employers providing health insurance and contributing towards health insurance premiums on employee job tenure. Using merged 2008–2018 data from the Job Tenure Supplement and Annual and Social Economic Supplement of the Current Population Survey, we find that employer health insurance is associated with one additional year of job tenure. We find that a thousand dollar increase in employer contributions to health insurance is associated with at least 83 additional days of job tenure, compared to less than 10 additional days for a thousand dollar increase in wages.

Understanding, explaining, and utilizing medical artificial intelligence
Romain Cadario, Chiara Longoni & Carey Morewedge
Nature Human Behaviour, forthcoming

Medical artificial intelligence is cost-effective and scalable and often outperforms human providers, yet people are reluctant to use it. We show that resistance to the utilization of medical artificial intelligence is driven by both the subjective difficulty of understanding algorithms (the perception that they are a ‘black box’) and by an illusory subjective understanding of human medical decision-making. In five pre-registered experiments (1–3B: N = 2,699), we find that people exhibit an illusory understanding of human medical decision-making (study 1). This leads people to believe they better understand decisions made by human than algorithmic healthcare providers (studies 2A,B), which makes them more reluctant to utilize algorithmic than human providers (studies 3A,B). Fortunately, brief interventions that increase subjective understanding of algorithmic decision processes increase willingness to utilize algorithmic healthcare providers (studies 3A,B). A sixth study on Google Ads for an algorithmic skin cancer detection app finds that the effectiveness of such interventions generalizes to field settings (study 4: N = 14,013).

Rent seeking for madness: The political economy of mental asylums in the United States, 1870 to 1910
Vincent Geloso & Raymond March
Public Choice, forthcoming

From the end of the Civil War to the onset of the Great War, the United States experienced an unprecedented increase in commitment rates for mental asylums. Historians and sociologists often explain this increase by noting that public sentiment called for widespread involuntary institutionalization to avoid the supposed threat of insanity to social well-being. However, that explanation neglects expanding rent seeking within psychiatry and the broader medical field over the same period. In this paper, we argue that stronger political influence from mental healthcare providers contributed significantly to the rise in institutionalization. We test our claim empirically with reference to the catalog of medical regulations from 1870 to 1910, as well as primary sources documenting rates of insanity at the state level. Our findings provide an alternative explanation for the historical rise in US institutionalizations.

The effects of Medicare on health care utilization and spending among the elderly
Pinka Chatterji, Tu Nguyen & Baris Kazim Yoruk
American Journal of Health Economics, forthcoming

We exploit the discontinuity in health insurance coverage rates at the Medicare eligibility age of 65 to investigate the impact of Medicare on health care utilization and spending among the elderly. We find that the discrete change in insurance coverage rates at age 65 leads to a significant increase in office-based physician and outpatient visits, which is mainly driven by those who were not insured before age 65. We also document that the Medicare eligibility at age 65 is associated with up to 36.5 percent decrease in out-of-pocket spending for physician and outpatient visits. On the other hand, we find that Medicare eligibility does not have a significant impact on the utilization of inpatient or emergency department services.

Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets
Sharat Ganapati & Rebecca McKibbin
NBER Working Paper, September 2021 

There is wide dispersion in pharmaceutical prices across countries with comparable quality standards. Under monopoly, off-patent and generic drug prices are at least four times higher in the United States than in comparable English-speaking high income countries. With five or more competitors, off-patent drug prices are similar or lower. Our analysis shows that differential US markups are largely driven by the market power of drug suppliers and not due to wholesale intermediaries or pharmacies. Furthermore, we show that the traditional mechanism of reducing market power – free entry – is limited because implied entry costs are substantially higher in the US.

The Effect of 'Failed' Community Mental Health Centers on Non-White Mortality
Mallory Avery & Jessica LaVoice
University of Pittsburgh Working Paper, July 2021

The Community Mental Health Act of 1963 established Community Mental Health Centers (CMHCs) across the country with the goalof providing continuous, comprehensive, community-oriented care to people suffering from mental illness. Despite this program being considered a failure by most contemporary accounts, the World Health Organization advocates for a transition from the institutionalization of the mentally ill to a system of community-centered care. In this paper, we construct a novel dataset documenting the rollout of CMHCs from 1971 to 1981 to identify the effect of establishing a CMHC on county level mortality rates, focusing on causes of death related to mental illness. Though we find little evidence that access to a CMHC impacted mortality rates in the white population, we find large and robust effects for the non-white population, with CMHCs reducing suicide and homicide rates by 8% and 14%, respectively. CMHCs also reduced deaths from alcohol in the female non-white population by 18%. These results suggest the historical narrative surrounding the failure of this program does not represent the non-white experience and that community care can be effective at reducing mental health related mortality in populations with the least access to alternative treatment options.

Bargaining with Private Equity: Implications for Hospital Prices and Patient Welfare
Tong Liu
University of Pennsylvania Working Paper, July 2021

I use proprietary insurance claims data to study the impact of private equity (PE) hospital buyouts on hospital price negotiations, health care spending, and patient welfare. I structurally estimate a model featuring PE buyouts, hospital–insurer bargaining, and patient choices. I find that PE buyouts lead to an 11% increase in total health spending of the privately insured, mostly driven by an increase in bargained prices at PE-backed hospitals and spillovers to local rivals. Specifically, PE investors’ superior bargaining skills account for 43% of the price and spending increases, while financial engineering and bankruptcy threats contribute 40%, changes in patient demand contribute 10%, and decreases in social responsibility contribute 8%. Operational efficiency gains reduce spending, but only by 1%. A counterfactual ban on PE hospital buyouts would increase patient surplus by an equivalent of 10.7% of total health spending in affected regions. If regulators ignore PE acquirers’ unique features, they risk greatly underestimating the impact of hospital M&As.

Do Mandated Health Insurance Benefits for Diabetes Save Lives?
Jinyeong Son
University of Texas Working Paper, July 2021

In response to the growing concern over diabetes, state-mandated health insurance benefits for diabetes have become popular since the late 1990s. However, little is known about whether these mandates improve the health of people with diabetes. In this paper, I use data from the Vital Statistics Multiple Cause of Death Mortality and the Behavioral Risk Factor Surveillance System to investigate the effects of these mandates on diabetes-related mortality rates, along with underlying mechanisms behind the estimated effects. Using a difference-in-differences framework that leverages variation in the enactment of mandates both across states and over time, I find that about 3.2 fewer diabetes-related deaths per 100,000 occur annually in mandate states than in non-mandate states. The mechanism analysis suggests higher utilization of the mandated medical benefits caused these mortality improvements. 

Telemedicine for Children With Medical Complexity: A Randomized Clinical Trial
Ricardo Mosquera et al.
Pediatrics, September 2021 

Methods: We conducted a single-center randomized clinical trial comparing telemedicine with CC [comprehensive care] relative to CC alone for medically complex children in reducing care days outside the home (clinic, emergency department, or hospital; primary outcome), rate of children developing serious illnesses (causing death, ICU admission, or hospital stay >7 days), and health system costs. We used intent-to-treat Bayesian analyses with neutral prior assuming no benefit. All participants received CC, which included 24/7 phone access to primary care providers (PCPs), low patient-to-PCP ratio, and hospital consultation from PCPs. The telemedicine group also received remote audiovisual communication with the PCPs.

Results: Between August 22, 2018, and March 23, 2020, we randomly assigned 422 medically complex children (209 to CC with telemedicine and 213 to CC alone) before meeting predefined stopping rules. The probability of a reduction with CC with telemedicine versus CC alone was 99% for care days outside the home (12.94 vs 16.94 per child-year; Bayesian rate ratio, 0.80 [95% credible interval, 0.66–0.98]), 95% for rate of children with a serious illness (0.29 vs 0.62 per child-year; rate ratio, 0.68 [0.43–1.07]) and 91% for mean total health system costs (US$33 718 vs US$41 281 per child-year; Bayesian cost ratio, 0.85 [0.67–1.08]).

Physician Response to Prices of Other Physicians: Evidence from a Field Experiment
Scott Barkowski
Clemson University Working Paper, July 2021

Recent efforts to increase price transparency for American consumers of health care have largely failed to produce savings. Medical-field research on physician-side price transparency, however, has shown promise for savings but suffers from pervasive methodological problems. I perform a field experiment that addresses these measurement difficulties while studying an area that has received little attention: physician referrals. Working with a group of medical practices linked as an Independent Practice Association (IPA), I randomly selected primary care practices to receive a list of average costs - that is, prices - for new referrals to six ophthalmology practices that were part of the IPA's provider network. These practices handled the bulk of the IPA's ophthalmology patients and represented substitute providers. Using the IPA's administrative data on referrals, I find that during the first two months following the distribution of the price list, the treatment group primary care physicians (PCPs) increased referral share towards the least expensive ophthalmology practice by 147 percent. These referrals were allocated away from the most expensive practice and those not listed on the report. These effects were only found, however, for patients for whom the PCPs had a cost reduction incentive. The large initial effect dissipated over the following four months. For patients with a limited financial interest for the PCPs, I find little evidence of a treatment response. These contrasting results suggest the PCPs were influenced by cost reduction motives and provide more evidence of the potential for savings from physician-side price transparency.

The Impact of Certificate of Need Laws on Heart Attack Mortality: Evidence from County Borders 
Kevin Chiu
Journal of Health Economics, September 2021 

Certificate of need (CON) regulations requires that health care providers obtain state approval before offering a new service or expanding existing facilities. The purported goal of CON regulations is to reduce health care costs by generating regional economies of scale and reducing redundant investments resulting from excessive competition. Critics of CON regulations note that the regulatory environment increases the costs of expansion and may incentivize health care providers to forgo capital investment, which can have a negative effect on health outcomes. To estimate the net effect of CON regulations, I use a border discontinuity design to measure within-regional heart attack mortality spanning 1968 to 1982. I estimate that CON regulations led to an increase in heart attack deaths, by 6%-10%, three years after the policy was enacted.



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