We report on research that concerns the efficacy of health care markets and the health of the population. This includes:

• the functioning of health insurance markets
• the impact of incentive mechanisms for the provision and quality of health care services by physicians and hospitals.
• the functioning of markets for pharmaceuticals and medical devices
• the interaction between health outcomes and economic behavior, and the effect of policy levers in changing them.

Latest articles

Health insurance competition: effects on premiums, hospital rates, and welfare

In evaluating health insurance mergers recently proposed in the U.S., regulators have grappled with the costs and benefits of reduced insurer competition. Our study examines the direct and indirect effects that a reduction in the number of insurers has on premiums, provider reimbursement rates, and consumer welfare. Using detailed health and enrollment data and focusing on a part of the commercial health care market, we examine whether consumers are typically harmed when an insurer is removed from the market. Absent premium setting constraints, we find that premiums typically rise, and consumers are generally harmed as they suffer from having fewer options. However, we also find that the reimbursement rates negotiated by hospitals need not always increase, and in many cases, can actually fall.

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A most egalitarian profession: pharmacy and the evolution of a family-friendly occupation

Pharmacy is among the most highly paid professions in the United States today; it is also one of the most egalitarian. Analysing extensive survey data on pharmacists and the general population, this research reveals how as the profession has become more flexible and the fraction of women has grown to a majority, pharmacy has become more highly paid relative to comparable occupations. The variance of pay has also declined and the relative hourly pay of women has risen. Technological changes that increased substitutability among pharmacists, the growth of pharmacy employment in retail chains and hospitals, and the related decline of independent pharmacies have all contributed to these outcomes.

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Disability insurance and the dynamics of the incentive-insurance tradeoff

Recent growth in the number of Disability Insurance claimants has led to calls for substantial scaling back of the program. We evaluate the incentive cost of the DI program against its insurance value to those in need. The main failure of the program is the number of severely work limited who do not receive insurance: the program is badly targeted.

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Hospital competition and patient choice can improve healthcare quality

The introduction of greater choice and competition in healthcare is an increasingly popular model for public service reform. This research shows that once restrictions on patients’ choice in England’s National Health Service were lifted, those requiring heart bypass surgery became more responsive to the quality of care available at different hospitals. This gave hospitals a greater incentive to improve quality and resulted in lower mortality rates. In short – the introduction of choice and competition saved lives.

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How much work can the long-term disabled do?

[intro]The number of people who receive long-term disability payments has grown rapidly in many countries, raising the question of whether it is possible for some of them to return to gainful employment. Analysing the impact of a major disability reform in the Netherlands, this research finds that long-term recipients of disability insurance were on average able to replace about 60% of lost benefits with labour income. This is evidence of substantial remaining work capacity among recipients and it suggests that there is scope for disability insurance reform to tap into this capacity.

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Financial incentives and disability rates

Can financial incentives encourage disability program participants to work? Due to a lack of randomized experiments with well-defined treatment and control groups, there is little evidence on this question. This paper helps to fill the void by exploiting a policy change in the Norwegian disability system that approximates a well-controlled policy experiment. The results show that financial incentives induce many disability recipients to work, enough so that overall program costs fall in spite of the added financial incentives. The analysis points to the possibility that incorporating financial incentives into the U.S. disability system could achieve similar results.

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Impoverished children with access to food stamps become healthier and wealthier adults

Adults who participated in the Food Stamp Program, renamed the Supplemental Nutrition Assistance Program (SNAP) in 2008, as children are healthier and better off financially than poverty-stricken families who did not have access to the program, according to findings in joint work with Douglas Almond and Diane Schanzenbach (this paper and a companion paper Almond, et al. 2011).

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Does the medical residency match lower salaries for residents?

What’s the best way to match new doctors to medical residency programs? The medical residency matching problem is solved by a centralized coordination system that pairs market participants according to their preferences. This paper examines the evidence for the claim that the matching system depresses salaries and finds that an alternative explanation – low salaries represent an implicit tuition fee for medical training – is more promising.

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Healthcare: how competition can improve management quality and save lives

NHS hospitals in England are rarely closed in constituencies where the governing party has a slender majority. This means that for near random reasons, those areas have more competition in healthcare – which has allowed the authors to assess its impact on management quality and clinical performance.

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