Choice in Insurance Markets: A Pigouvian Approach to Social Insurance Design

Should choice be offered in social insurance programs? This review presents a conceptual framework that identifies the key forces determining the social value of offering choice. We show that the value of offering choice is higher the larger the variation in individual valuations for extra insurance is, but it gets reduced by both selection on risk and selection on moral hazard. Besides adverse selection, the implementation of choice-based policies is further challenged by the presence of choice frictions or the obligation to offer basic uncompensated care. All these inefficiencies can be seen as externalities that do not rationalize the absence of providing choice per se but point to the need for regulatory policies and suggest the potential value of corrective pricing à la Pigou. Applying this framework to the existing evidence on these forces in the context of unemployment insurance, we find that offering insurance choice can be valuable even in the presence of significant adverse selection. We conclude by showing how this framework can constitute a fruitful guide for further empirical research in different insurance domains. Expected final online publication date for the Annual Review of Economics, Volume 13 is August 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Hospital Lobbying and Performance

Lobbying is a primary avenue through which business organizations attempt to influence legislation, regulations, or policies. In this study, we examine the association between lobbying and hospital performance and find that the effects of lobbying activities on hospital performance vary according to the distinct types of hospital ownership. Specifically, we find that lobbying raises employee salaries in not-for-profit (NFP) hospitals, reduces uncompensated care costs in both for-profit and NFP hospitals, and increases return on assets (ROA) in for-profit hospitals. We also find that the effects of lobbying on employee salaries, uncompensated care costs, and ROA are not significant in government hospitals. Taken together, our findings suggest that NFP hospitals lobby to protect employees’ interests, while for-profit hospitals lobby to maximize investors’ interests. Our paper provides evidence to illustrate that the goals and effects of hospital lobbying vary according to hospital ownership types.

Defining safety net hospitals in the health services research literature: a systematic review and critical appraisal

Background The aim of this study was to identify the range of ways that safety net hospitals (SNHs) have been empirically operationalized in the literature and determine the extent to which patterns could be identified in the use of empirical definitions of SNHs. Methods We conducted a PRISMA guided systematic review of studies published between 2009 and 2018 and analyzed 22 articles that met the inclusion criteria of hospital-level analyses with a clear SNH definition. Results Eleven unique SNH definitions were identified, and there were no obvious patterns in the use of a definition category (Medicaid caseload, DSH payment status, uncompensated care, facility characteristics, patient care mix) by the journal type where the article appeared, dataset used, or the year of publication. Conclusions Overall, there is broad variability in the conceptualization of, and variables used to define, SNHs. Our work advances the field toward the development of standards in measuring, operationalizing, and conceptualizing SNHs across research and policy questions.

Measuring the COVID-19 Financial Threat to Hospital Markets

Many hospitals have been straining under the financial stress of treating COVID-19 patients. Those experiencing the greatest strain are in markets burdened with high levels of debt and uncompensated care. We propose a new measure of financial risk in a hospital market, combining both pre-existing financial vulnerability and COVID-19 severity. It reveals the highest concentrations of risk in counties with high poverty, low population density, and high shares of foreign-born and non-White populations. The CARES Act Provider Relief Fund helped many of the hospitals in these regions, but it left many markets with the same overall vulnerability to financial strain from the next health crisis.

Performance of Multihospital Health Systems’ Flagship Hospitals in the CMS Star Rating Program

Using the Hospital Compare overall hospital quality star ratings and other publicly available data on acute care hospitals, we examined star ratings for the flagship hospitals of a set of multihospital health systems in the United States. We compared star ratings and hospital characteristics of flagship and nonflagship hospitals across and within 113 health systems. The system flagship hospitals had significantly lower star ratings than did nonflagship hospitals, and they did not generally have the highest star ratings in their own systems. Higher teaching intensity, larger bed size, higher uncompensated care, and higher disproportionate share hospital (DSH) patient percentage were all significantly associated with lower star ratings of flagship hospitals when compared with nonflagship hospitals across all health systems; the flagship hospital of a system was more likely to have the lowest star rating in its system if the difference in DSH percentage was relatively large between the flagship and nonflagship hospitals in that system.

Uncompensated Care: How Much is Too Much?

Texas is home to the largest uninsured population in the U.S. Such problems emerge, in large measure, from thestate’s rejection of Medicaid expansion. That decision has prevented Texas from receiving $100 billion in federalcash over a decade. Consequently, the number of uninsured residents either going without local medical care oroverloading adjacent communities is likely to increase. Therefore, this study seeks to explain the implicationsof Medicaid expansion in Denton county. This paper explores the effects of expanding Medicaid and how thatwould affect race, income, and Medicaid eligibility for indigent patients. The results of a Python–based simulationshow that, adjusting for Denton’s population growth at projected levels of uninsured, by 2020 the uncompensatedcare will cost Denton County $42,716,796. This number will continue to rise to a total of $61,462,134 as a resultof ceasing Medicaid expansion and getting rid of the individual mandate. These numbers are important as theyshow the rising costs of uncompensated care that are associated with an increase in population growth.

Uncompensated Care and the Collapse of Hospital Payment Regulation: An Illustration of the Tinbergen Rule

The primary objective of “all-payer” rate setting—regulatory regimes through which states set hospital payment rates for all insurers—was to control costs through consistent, centrally regulated payments. These regimes were often linked, however, to an ancillary goal of financing care for the uninsured. We show that the surcharge mechanism used to achieve this secondary objective decreased the stability of these payment regimes. This instability reflected a feedback loop from surcharge rates to insurance coverage and back to the quantities of uncompensated care in need of financing. Instability was exacerbated when Health Maintenance Organizations were exempted from surcharge collections, creating a regulatory arbitrage opportunity. Legal challenges connected to the incidence of uncompensated care surcharges contributed to the abandonment of all-payer rate regulation by several states. These developments illustrate the wisdom of the Tinbergen Rule, which recommends that independent policy objectives be met with independent policy instruments.