Kevin Lewis

May 03, 2021

The Pathways of Policy Feedback: How Health Reform Influences Political Efficacy and Participation
Lawrence Jacobs, Suzanne Mettler & Ling Zhu
Policy Studies Journal, forthcoming


How do policy feedback effects occur? A growing number of rigorous empirical studies provide evidence that new policies can, indeed, stimulate new politics, such as increased political participation among citizens, but greater understanding is needed of the underlying mechanisms and long‐term policy feedback effects. This paper puts forth a dynamic theory of the mechanisms through which policy experiences may influence political participation, focusing particularly on political efficacy. We use five waves of panel data collected over 8 years to investigate the impact of the Affordable Care Act (ACA), controlling for pre‐existing ideology and socio‐economic and demographic factors. We analyze the impact of resource and interpretive effects and disentangle direct and indirect effects. We find that the ACA has elevated Americans’ political efficacy and political participation with large and enduring effects, and we show the pathways through which this has occurred.

Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes
Cyrus Aghamolla et al.
NBER Working Paper, April 2021


This study examines the link between credit supply and hospital health outcomes. Using detailed data on hospitals and the banks that they borrow from, we use bank stress tests as exogenous shocks to credit access for hospitals that have lending relationships with tested banks. We find that affected hospitals shift their operations to enhance their profit margins in response to a negative credit shock, but reduce the quality of their care to patients across a variety of measures. In particular, affected hospitals exhibit significantly lower attentiveness in providing timely and effective treatment and procedures, and are rated substantially lower in patient satisfaction. This decline in care quality is reflected in health outcomes: affected hospitals experience a significant increase in risk-adjusted, unplanned 30-day readmission rates of recently discharged patients and in risk-adjusted 30-day patient mortality rates. Overall, the results indicate that access to credit can affect the quality of healthcare hospitals deliver, pointing to important spillover effects of credit market frictions on health outcomes.

Missing Novelty in Drug Development
Joshua Krieger, Danielle Li & Dimitris Papanikolaou
Review of Financial Studies, forthcoming


We provide evidence that risk aversion leads pharmaceutical firms to underinvest in radical innovation. We introduce a new measure of drug novelty based on chemical similarity and show that firms face a risk-reward trade-off: novel drug candidates are less likely to obtain FDA approval but are based on more valuable patents. Consistent with a simple model of costly external finance, we show that a positive shock to firms’ net worth leads firms to develop more novel drugs. This suggests that even large firms may behave as though they are risk averse, reducing their willingness to investment in potentially valuable radical innovation.

Cancer diagnoses and survival rise as 65‐year‐olds become Medicare‐eligible
Deven Patel et al.
Cancer, forthcoming

Methods: Patients aged 61 to 69 years who were diagnosed with lung, breast, colon, or prostate cancer from 2004 to 2016 were identified with the Surveillance, Epidemiology, and End Results database and were dichotomized on the basis of eligibility for Medicare (61‐64 vs 65‐69 years). With age‐over‐age (AoA) percent change calculations, trends in cancer diagnoses and staging were characterized. After matching, uninsured patients who were 61 to 64 years old (pre‐Medicare group) were compared with insured patients who were 65 to 69 years old (post‐Medicare group) with respect to cancer‐specific mortality.

Results: In all, 134,991 patients were identified with lung cancer, 175,558 were identified with breast cancer, 62,721 were identified with colon cancer, and 238,823 were identified with prostate cancer. The AoA growth in the number of cancer diagnoses was highest at the age of 65 years in comparison with all other ages within the decade for all 4 cancers (P < .01, P < .001, P < .01, and P < .001, respectively). In a comparison of diagnoses at the age of 65 years with those in the 61‐ to 64‐year‐old cohort, the greatest difference for all 4 cancers was seen in stage I. In matched analyses, the 5‐year cancer‐specific mortality was worse for lung (86.3% vs 78.5%; P < .001), breast (32.7% vs 11.0%; P < .001), colon (57.1% vs 35.6%; P < .001), and prostate cancer (16.9% vs 4.8%; P < .001) in the uninsured pre‐Medicare group than the insured post‐Medicare group.

When Should There Be Vertical Choice in Health Insurance Markets?
Victoria Marone & Adrienne Sabety
University of Texas Working Paper, March 2021


We study the welfare effects of offering choice over coverage levels – “vertical choice” – in regulated health insurance markets. Though the efficient level of coverage, which trades off the value of risk protection and the social cost from moral hazard, likely varies across consumers, we emphasize that this variation alone is not sufficient to motivate choice. We show that vertical choice is efficient only if consumers with higher willingness to pay for insurance have a higher efficient level of coverage. Using administrative data from a large employer, we find that the welfare gains from vertical choice are either zero or economically small.

The Role of Patient Satisfaction in Hospitals’ Medicare Reimbursements
Lu Liu, Dinesh Gauri & Rupinder Jindal
Journal of Public Policy & Marketing, forthcoming


Medicare uses a pay-for-performance program to reimburse hospitals. One of the key input measures in the performance formula is patient satisfaction with their hospital care. Physicians and hospitals, however, have raised concerns regarding questions related to patient satisfaction with pain management during hospitalization. They report feeling pressured to prescribe opioids to alleviate pain and boost satisfaction survey scores for higher reimbursements. This overprescription of opioids has been cited as a cause of current opioid crisis in the United States. Due to these concerns, Medicare stopped using pain management questions as inputs in its payment formula. The authors collected multiyear data from six diverse data sources, employed propensity score matching to obtain comparable groups, and estimated difference-in-difference models to show that, in fact, pain management was the only measure to improve in response to the pay-for-performance system. No other input measure showed significant improvement. Thus, removing pain management from the formula may weaken the effectiveness of the Hospital Value-Based Purchasing Program at improving patient satisfaction, which is one of the key goals of the program. The authors suggest two divergent paths for Medicare to make the program more effective.

Accuracy of Practitioner Estimates of Probability of Diagnosis Before and After Testing
Daniel Morgan et al.
JAMA Internal Medicine, forthcoming

Design, Setting, and Participants: In this survey study, 723 practitioners at outpatient clinics in 8 US states were asked to estimate the probability of disease for 4 scenarios common in primary care (pneumonia, cardiac ischemia, breast cancer screening, and urinary tract infection) and the association of positive and negative test results with disease probability from June 1, 2018, to November 26, 2019. Of these practitioners, 585 responded to the survey, and 553 answered all of the questions. An expert panel developed the survey and determined correct responses based on literature review.

Results: A total of 553 (290 resident physicians, 202 attending physicians, and 61 nurse practitioners and physician assistants) of 723 practitioners (76.5%) fully completed the survey (median age, 32 years; interquartile range, 29-44 years; 293 female [53.0%]; 296 [53.5%] White). Pretest probability was overestimated in all scenarios. Probabilities of disease after positive results were overestimated as follows: pneumonia after positive radiology results, 95% (evidence range, 46%-65%; comparison P < .001); breast cancer after positive mammography results, 50% (evidence range, 3%-9%; P < .001); cardiac ischemia after positive stress test result, 70% (evidence range, 2%-11%; P < .001); and urinary tract infection after positive urine culture result, 80% (evidence range, 0%-8.3%; P < .001). Overestimates of probability of disease with negative results were also observed as follows: pneumonia after negative radiography results, 50% (evidence range, 10%-19%; P < .001); breast cancer after negative mammography results, 5% (evidence range, <0.05%; P < .001); cardiac ischemia after negative stress test result, 5% (evidence range, 0.43%-2.5%; P < .001); and urinary tract infection after negative urine culture result, 5% (evidence range, 0%-0.11%; P < .001). Probability adjustments in response to test results varied from accurate to overestimates of risk by type of test (imputed median positive and negative likelihood ratios [LRs] for practitioners for chest radiography for pneumonia: positive LR, 4.8; evidence, 2.6; negative LR, 0.3; evidence, 0.3; mammography for breast cancer: positive LR, 44.3; evidence range, 13.0-33.0; negative LR, 1.0; evidence range, 0.05-0.24; exercise stress test for cardiac ischemia: positive LR, 21.0; evidence range, 2.0-2.7; negative LR, 0.6; evidence range, 0.5-0.6; urine culture for urinary tract infection: positive LR, 9.0; evidence, 9.0; negative LR, 0.1; evidence, 0.1).

Do patients benefit from legislation regulating step therapy?
Louis Tharp & Zoe Rothblatt
Health Economics, Policy and Law, forthcoming


Step therapy, also termed fail-first policy, describes a practice of insurance and pharmacy benefit management companies denying reimbursement for a specific treatment until after other treatments have first been found ineffective (i.e. failed). Laws to limit step therapy have been passed in 29 states of the United States. Using extrapolated data on fully insured employees, we find that except for New York and New Mexico, enacted State laws don't apply to even one-third of a state's population. Using the more robust Kaiser Family Foundation (KFF) data, which do not include fully insured employees, we find that only 2–10% of a state's population is covered. Advocating for these laws has been an expensive and time-consuming process, likely to become more so for the 21 states without such laws. The laws that have been enacted can be near impossible to enforce, and loopholes exist. As a result, using KFF data, more than 90% of people in the United States with health insurance may still be unable to access the treatment chosen as most appropriate for them with their physician. Based on these data, we conclude federal step-therapy legislation is needed.

Medical Malpractice and Physician Discipline: The Good, The Bad and The Ugly
David Hyman, Mohammad Rahmati & Bernard Black
Journal of Empirical Legal Studies, March 2021, Pages 131-166


We study the overlap between the medical malpractice (med mal) and medical disciplinary systems using the records of almost 90,000 Illinois physicians who held an active license at any point from 1990–2016. We quantify the specialty‐specific risk of having a paid med mal claim or a disciplinary action; how many physicians have both; and the extent to which physicians with two or more paid claims or two or more disciplinary actions account for a disproportionate share of the activity of both systems. We also examine which factors are associated with paid claims and disciplinary actions, and whether physicians with multiple paid claims or disciplinary actions are concentrated at particular hospitals. Physicians with two or more paid claims account for only 2.37 percent of all licensed physicians, but they account for 53 percent of paid claims and payouts. Physicians with two or more disciplinary actions account for only 0.47 percent of physicians but 28 percent of all disciplinary actions. The risk of paid claims and disciplinary actions varies greatly by specialty. Physicians who attended non‐U.S. medical schools are more likely to have paid claims but (except for high‐disciplinary‐risk specialties) are not more likely to be subject to disciplinary action. Physicians with prior paid claims are more likely to be the target of disciplinary action — but not vice versa. A small number of Illinois hospitals are staffed by physicians with unusually high numbers of paid med mal claims, disciplinary actions, or both.

Trading Spaces: Medicare’s Regulatory Spillovers on Treatment Setting for Non-Medicare Patients
Michael Geruso & Michael Richards
NBER Working Paper, March 2021


Medicare pricing is known to indirectly influence provider prices and care provision for non-Medicare patients; however, Medicare’s regulatory externalities beyond fee-setting are less well understood. We study how physicians’ outpatient surgery choices for non-Medicare patients responded to Medicare removing a ban on ambulatory surgery center (ASC) use for a specific procedure. Following the rule change, surgeons began reallocating both Medicare and commercially insured patients to ASCs. Specifically, physicians became 70% more likely to use ASCs for the policy-targeted procedure among their non-Medicare patients. These novel findings demonstrate that Medicare rulemaking affects physician behavior beyond the program’s statutory scope.

Mergers and marginal costs: New evidence on hospital buyer power
Stuart Craig, Matthew Grennan & Ashley Swanson
RAND Journal of Economics, Spring 2021, Pages 151-178


We estimate the effects of hospital mergers, using detailed data containing medical supply transactions (representing 23% of operating costs) from a sample of US hospitals, 2009–2015. Pre‐merger price variation across hospitals (Gini coefficient 7%) suggests significant opportunities for cost decreases. However, we observe limited evidence of actual savings. In this retrospective study, targets realized 1.9% savings; acquirers realized no significant savings. Examining treatment effect heterogeneity to shed light on theories of “buyer power,” we find that savings, when they occur, tend to be local, and potential benefits of savings may be offset by managerial costs of merging.


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