Research

WORKING PAPERS: 

"Lagged-Price Reimbursement Contracts: The Impact of Medicare Part B on Pharmaceutical Price Growth " with Keith Ericson and Amanda Starc [October 2023] NBER WP #31834 

We examine cost-plus lagged-price reimbursement contracts, focusing on Medicare Part B's payment for physician-administered drugs. Our theoretical model shows that lagged-price reimbursement can raise launch prices but lower prices in later periods. While previous research showed Part B increased launch prices, we estimate its effect on later prices (net of rebates). Drugs more exposed to Medicare have lower price growth. A drug with above median Part B exposure has a 10% lower price after 3 years than a below median exposure drug that launched at the same price, with a larger effect for newly approved molecules.

"Health Care Demand Among Low-Income Individuals" [UPDATED June 2024] TSE WP 23-1477 (slides)

Low-income individuals are typically the most price sensitive segment of the market, but this is not true in the market for health care.  Using data from the RAND and Oregon experiments, I show that low-income individuals are less likely to participate in health care markets, relative to higher income counterparts, attenuating the average demand elasticity for this group. The key insight is that income effects may exclude low-income individuals from participating because, when marginal utility of consumption is high, forgoing non-medical consumption becomes prohibitively costly. I then show theoretically that these income effects are consequential for optimal health insurance design.

"Contracting Solutions with Ethical Professional Norms" [April 2022]

I study optimal health care contracting in a principal-agent framework with altruistic providers. I find that financial incentives alone cannot correct for the inefficiencies in the health care system, but financial incentives combined with ethical professional norms (altruism) can. Despite asymmetric information and imperfect agency, systems that pay using global budgets (such as the U.K.) can achieve first best outcomes, but this requires that providers value patient benefits from costlier treatments. Failing to account for altruism and using cost-reimbursement contracts creates incentives to provide low-value care, and high-volumes of these services accrue to significant economic magnitudes.

"The Health Dimension of Redistribution: Theory and Empirics" with Amitabh Chandra and Michael Eber [Dec 2023] (draft coming soon) 

While the literature on social preferences for redistribution has largely focused on income and consumption inequality, we examine the extent to which redistributive preferences depend on an additional margin–health status. We conduct a large-scale survey experiment of money allocation games designed to separately identify redistributive preferences over income and health. We find that respondents prefer to allocate transfers to sicker individuals, holding income fixed, and to lower income individuals, holding health fixed, but there is substantial heterogeneity in preferences across health conditions. Our results imply that the marginal social value of public expenditures on individuals suffering from particular types of illnesses could be very large; which consequently affects the equity-efficiency trade-off underlying optimal policy design.

"Risk Protection Value of Moral Hazard" with Victoria Marone [May 2024] (draft coming soon) 

Standard health insurance contracts lower the marginal out-of-pocket price of healthcare utilization, and it is well-established that this leads to higher consumption of healthcare (``ex-post moral hazard''). Relative to insurance that does not distort the marginal price of care, standard contracts therefore provide consumers additional ex-post utility in the form of incremental healthcare consumption. We show that if incremental care is differentially valuable in different health states, moral hazard directly interacts with the value of risk protection derived from insurance. In particular, if the value of incremental care is higher in sick rather than healthy states, the presence of moral hazard allows consumers to better smooth their marginal utility of consumption. Under standard parameterizations of consumer demand for healthcare and health insurance, estimates in the literature imply that moral hazard accounts for as much as 25 percent of the total value of risk protection derived from insurance. Moreover, in some cases, insurance contracts that permit ex post moral hazard increase social welfare relative to contracts that do not distort the marginal price of care.

“Health Insurance for Redistribution”  with Myles Wagner and Anthony Yu [June 2023] (draft available upon request)

The paper studies the role of health insurance for health equity. We consider a social planner that cares about health inequality in addition to income inequality. Focusing on a restricted policy space that offers different health care subsidies for the rich and poor, we derive sufficient statistics formulas for optimal policy, which depends on three objects: demand elasticities of medical spending by income, the joint distribution of health, income, and medical spending, and social preferences. We calibrate the joint distribution of health, income and medical spending using the Medical Expenditure Panel Survey, and revisit the RAND Health Insurance experiment to recover demand elasticities by income. Then, we simulate the optimal joint health insurance policy and tax schedule using social welfare weights that approximate Utilitarian and Rawlsian welfare objectives over health and income. An egalitarian planner chooses Medicare for all, and a Rawlsian planner chooses a public insurance policy that is much more generous than current Medicaid: full coverage for individuals below 300% of the Federal Poverty Line, and partial coinsurance for the rest.

“Evaluating Prospective Payment Contracts”  [Nov 2021]  (draft available upon request)

This paper proposes a method for evaluating the optimality of provider reimbursement contracts that are partially retrospective, meaning that they condition payment on ex-post reported costs. In a setting where patients heterogeneously benefit from medical care, I derive the optimal linear reimbursement contract for an insurer maximizing the aggregate health of his patients. Then, I propose two claims-based methods to empirically calibrate the optimality condition of the insurer with respect to the component of the contract that reimburses retrospectively. I apply one method to the Medicare Outpatient Prospective Payment System, and find that payments are too prospective.

WORK IN PROGRESS:  

"Physician Burnout and Administrative Burdens" with Alice Chen

"Redesigning Payment Policy for Physician Administered Drugs" with Keith Ericson and Amanda Starc NIHCM Grant Award

"Income Loss Following Sickness" with Anup Malani 

"Welfare Measures Based on Willingness to Pay" with Jean-Marie Lozachmeur and François Salanié

“A Prescription for Manipulation” with Sayeh Nikpay and Rena Conti

PUBLICATIONS:  

“Provider Payment Systems and Incentives” with Tianxu Chen, Randall P Ellis, and Taylor Watson [forthcoming] International Encyclopedia of Public Health, Third Edition.