Research

Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul 

with Tal Gross, Adam Sacarny, and David Silver

Forthcoming, Review of Economics and Statistics

[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.

Monitoring for Waste: Evidence from Medicare Audits

Revise and resubmit, Quarterly Journal of Economics

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

Abstract: This paper examines the extent to which public programs should monitor for wasteful expenditure. I study a large Medicare program that monitored for unnecessary healthcare spending, and consider its effect on government savings, provider compliance costs, 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. The health of the marginal patient denied care is not harmed, indicating that monitoring primarily deters unnecessary care. Instead, the main tradeoff to monitoring is the compliance cost it imposes on providers – for every $1,000 in Medicare savings, providers incur $178–218 in higher administrative costs. However, I provide evidence that these costs are driven by the investments providers make to improve compliance, like adopting technology to assess the cost-effectiveness of care, rather than the hassle costs of the monitoring process.

Free to Spend? The Effect of Decentralization on Local Governments

with Andrea Tulli

Latest version April 2022.

Research Question: How does decentralization affect local revenue and expenditure?

Abstract: We consider how decentralization of fiscal autonomy to local governments affects their budgetary decisions. We study an Italian reform which expanded municipal discretion and responsibility over property taxation, using novel data on what the national government would have done in a more centralized system. Municipalities on average picked higher tax rates than the national government would have. Municipalities respond to additional responsibility by raising more revenue and spending more on public services. Local  conditions shape these municipal responses: those with greater political competition or worse economic conditions spend more on public services, but less on administration and public official remuneration.