Volume 12, Issue 1

This paper examines the impact of public health insurance expansions through both Medicaid and SCHIP on children's educational outcomes, measured by 4th and 8th grade reading and math test scores, available from the National Assessment of Educational Progress (NAEP). We use a triple difference estimation strategy, taking advantage of the cross-state variation over time and across ages in children's health insurance eligibility. Using this approach, we find that test scores in reading, but not math, increased for those children affected at birth by increased health insurance eligibility. A 50 percentage point increase in eligibility is found to increase reading test scores by 0.09 standard deviations. We also examine whether the improvements in educational outcomes can be at least partially attributed to improvements in health status itself. First, we provide further evidence that increases in eligibility are linked to improvements in health status at birth. Second, we show that better health status at birth (measured by rates of low birth-weight and infant mortality), is linked to improved educational outcomes. Although the methods used to support this last finding do not completely eliminate potentially confounding factors, we believe it is strongly suggestive that improving children's health will improve their classroom performance.

This paper explores the relationship between competition and hospital charity care by analyzing changes in charity care associated with changes in a hospital's competitive environment (due to mergers and divestitures), using hospital financial and discharge data from Florida and Texas. Despite the pervasive belief that competition impedes a hospital's ability to offer services to the uninsured and under-insured, I find no statistically significant evidence that increased competition leads to reductions in charity care. In fact, I find some evidence that reduced competition leads to higher prices for uninsured patients.

We use data from California to document and offer possible explanations for the sharp increase in hospital prices charged to private payers after 1999. We find a downward trend in price for private pay patients in the 1990s and a rapid upward trend beginning in 1999, amounting to an annual average increase of 10.6% per year over 1999-2005. Prices in 2006 were almost double prices in 1999. By contrast, there was little discernable trend in prices for Medicare and Medicaid patients, although these prices varied from year-to-year. Surprisingly, the increase in prices is not correlated, geographically, with the change in hospital market concentration. For example, the greatest price rises came from hospitals in monopoly and highly concentrated counties which experienced little or no change over our sample period. Two recent California state hospital regulations, the seismic retrofit mandate and the mandatory nurse staffing ratio affected hospital costs. However, the cost increases due to the nursing staffing regulations are not large enough to account for the price increase, and the price increase is not substantially correlated with the costs of compliance with the seismic retrofit mandate. Therefore, the source of the near-doubling of California hospital prices remains something of a mystery.

Research Objective: This study offers a novel approach to workforce planning in the physician market. Rather than projecting the future demand for physician services, a human capital model is used to estimate the societal cost of producing a physician service. The socially optimal workforce is one at which (at optimal practice scale), the societal cost of producing a physician service is equal to the societal benefit obtained from the service.Study Design: Physician human capital consists of two components: the underlying human capital (productivity) of those who become physicians and the job-specific investments (physician training) added to this underlying capital. The value of physicians' underlying human capital is estimated using a regression analysis of the National Longitudinal Sample of Youth (NLSY). For those in the survey who did not go on to become doctors, income over time is modeled as a function of a rich set of variables measured in youth, including family background, educational attainment and a range of high-school level performance tests. This equation is then used to forecast an age-earnings profile for doctors based on the characteristics in youth of those NLSY cohort participants who subsequently became doctors. Next, published estimates are used to measure the total cost (wherever paid) of investments in physician training. Combining these estimates, the social cost per primary care physician provided visit and Medicare relative value unit (RVU) is determined.Principal Findings: Physicians are drawn from the highest performing group of high school students. The earnings of comparable students who do not become doctors and the predicted earnings of would be doctors are substantially above the population mean. The opportunity cost of physician human capital is thus very high. The estimated societal cost per primary care physician visit is substantially higher than the average co-payment. The societal cost per primary care physician provided RVU is generally higher than the current Medicare compensation rate per RVU. The private return to primary care physician training is relatively low, in the range of 7-9%.Conclusions: At current levels of supply, the marginal social costs of primary care visits appear to be equal to or greater than marginal social benefits of many primary care services. In considering expansions of primary care capacity, it may be efficient to increase the use of complementary, lower-skilled practitioners.

Critics of me-too innovation often argue that follow-on drugs offer little incremental clinical value over existing pioneer products, while at the same time increasing health care costs. We examine whether consumers view follow-on and pioneer drugs as close substitutes or distinct clinical therapies. For five major classes of drugs, we find that large reductions in the price of pioneer molecules after patent expiration—which would typically lead to decreased consumption of strong substitutes—have no effect on the trend in demand for follow-on drugs. Our findings are likely unaffected by health insurance, competitive pricing of me-toos, marketing, and switching costs.