"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 - submitted
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.
"The Demand Elasticity of Health Care Spending for Low-Income Individuals" [August 2023] TSE WP 23-1477
Low-income individuals are typically the most price sensitive segment of the market, but this is not true in the market for health care services. I show that low-income individuals have a smaller demand elasticity of medical spending with respect to coinsurance, relative to their higher income counterparts, using data from the RAND Health Insurance experiment. The null effect is driven by disproportionate share of low-income individuals who consume zero health care. The key insight is that low-income individuals may optimally consume zero health care because, when marginal utility of consumption is high, forgoing non-medical consumption becomes very costly.
"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.
“Health Insurance for Redistribution” with Myles Wagner and Anthony Yu (new draft coming soon)
WORK IN PROGRESS:
"Income Loss Following Sickness" with Anup Malani
"Social Preferences Over Health Conditions" with Amitabh Chandra and Michael Eber
"Risk Protection Value of Moral Hazard" with Victoria Marone
"Physician Burnout and Administrative Burdens" with Alice Chen
"Redesigning Payment Policy for Physician Administered Drugs" with Keith Ericson and Amanda Starc NIHCM Grant Award
“A Prescription for Manipulation” with Sayeh Nikpay and Rena Conti
“Provider Payment Systems and Incentives” with Tianxu Chen, Randall P Ellis, and Taylor Watson [forthcoming] International Encyclopedia of Public Health, Third Edition.