Monitoring for Waste: Evidence from Medicare Audits

Quarterly Journal of Economics, 2024, 139(2): 993-1049 

[Ungated] [Online Appendix] [MVPF Appendix] [NBER WP]  |  [Summary] 

Research Question: How effective is monitoring for wasteful healthcare spending?

Abstract: This paper examines the tradeoffs of monitoring for wasteful public spending. By penalizing unnecessary spending, monitoring improves the quality of public expenditure and incentivizes firms to invest in compliance technology. I study a large Medicare program that monitored for unnecessary healthcare spending and consider its effect on government savings, provider behavior, and patient health. Every dollar Medicare spent on monitoring generated $24-29 in government savings. The majority of savings stem from the deterrence of future care, rather than reclaimed payments from prior care. I do not find evidence that the health of the marginal patient is harmed, indicating that monitoring primarily deters low-value care. Monitoring does increase provider administrative costs, but these costs are mostly incurred upfront and include investments in technology to assess the medical necessity of care. 

[Ungated] [NBER WP]

Research Question: How do hospitals respond to changes in the price of an inpatient admission?

Abstract:  We study a 2008 policy reform in which Medicare revised its hospital payment system to better reflect patients’ severity of illness. We construct a simulated instrument that predicts a hospital’s policy-induced change in reimbursement using pre-reform patients and post-reform rules. The reform led to large persistent changes in Medicare payment rates across hospitals. Hospitals that faced larger gains in Medicare reimbursement increased the volume of Medicare patients they treated. The estimates imply a volume elasticity of 1.2. To accommodate greater volume, hospitals increased nurse employment, but also lowered length of stay, with ambiguous effects on quality.

Working Papers


Research Question: How does extending health insurance coverage to young adults affect their parents' labor supply?

Abstract: A common feature of employer-sponsored insurance is coverage for dependents. While prior work shows that employees trade off job mobility for their own coverage, there is less evidence on the intra-family spillovers of dependent coverage onto parental labor supply. We study this using a panel of insurance claims that links dependent insurance enrollment with a proxy for parental job tenure. We develop a regression discontinuity design that exploits variation in coverage eligibility by dependent birth date from the Affordable Care Act. We find that a one percent increase in the dependent enrollment likelihood increases parental job retention by 0.20 percent.

Research Question: How does decentralization affect local government budgets? 

Abstract: This study examines the impact of revenue decentralization on local government budgets, focusing on a 2012 Italian reform transitioning revenue sources from national transfers to local property tax. Through a difference-in-difference approach, we identify three key results. First, municipalities raise overall tax revenue. Second, they enhance progressivity by altering tax composition and also directly increasing the personal income tax rates. Finally, despite no change in expenditure, public good provision also increases. The size of the personal income tax base determines how municipalities respond: municipalities with higher bases increased income tax revenues, whereas those with lower bases relied more on non-tax revenue.

Work in Progress

The Limits of Spending Limits

with Ashvin Gandhi.

Research Question: How do "soft" spending limits work in health care, and which patients and providers are most affected by them?

Managing Margins: PE Effects on Financial, Physical, and Human Capital

with Michael Richards and Chris Whaley

Research Question: How does private equity acquisition affect the operations and financial performance of hospitals?

Effects of Nursing Home Payment on Patient-Centered Outcomes

with Tal Gross, Adam Sacarny, and David Silver.

Research Question: How do nursing homes respond to changes in payment, and how does this affect patient health outcomes?