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Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform

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  • Martin B. Hackmann
  • Jonathan T. Kolstad
  • Amanda E. Kowalski

Abstract

We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection.

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  • Martin B. Hackmann & Jonathan T. Kolstad & Amanda E. Kowalski, 2012. "Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform," American Economic Review, American Economic Association, vol. 102(3), pages 498-501, May.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:498-501
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    1. Jonathan Gruber, 2011. "Massachusetts points the way to successful health care reform," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(1), pages 184-192, December.
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    3. David M. Cutler & Sarah J. Reber, 1998. "Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 433-466.
    4. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2010. "Estimating Welfare in Insurance Markets Using Variation in Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 877-921.
    5. Kowalski, A. & Kolstad, J., 2010. "The Impact of an Individual Health Insurance Mandate on Hospital and Preventive Care: Evidence from Massachusetts," Health, Econometrics and Data Group (HEDG) Working Papers 10/18, HEDG, c/o Department of Economics, University of York.
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    7. Kolstad, Jonathan T. & Kowalski, Amanda E., 2012. "The impact of health care reform on hospital and preventive care: Evidence from Massachusetts," Journal of Public Economics, Elsevier, vol. 96(11), pages 909-929.
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    Cited by:

    1. Craig Garthwaite & Tal Gross & Matthew J. Notowidigdo, 2014. "Public Health Insurance, Labor Supply, and Employment Lock," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 653-696.
    2. Didem Tuzemen & Makoto Nakajima, 2014. "Health Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act," 2014 Meeting Papers 1325, Society for Economic Dynamics.
    3. Depew, Briggs & Bailey, James, 2015. "Did the Affordable Care Act's dependent coverage mandate increase premiums?," Journal of Health Economics, Elsevier, vol. 41(C), pages 1-14.
    4. Naoki Aizawa & Hanming Fang, 2020. "Equilibrium Labor Market Search and Health Insurance Reform," Journal of Political Economy, University of Chicago Press, vol. 128(11), pages 4258-4336.
    5. Jonathan T. Kolstad & Amanda E. Kowalski, 2012. "Mandate-Based Health Reform and the Labor Market:� Evidence from the Massachusetts Reform," Cowles Foundation Discussion Papers 1855, Cowles Foundation for Research in Economics, Yale University.
    6. Ngo, Diana K.L. & Bauhoff, Sebastian, 2021. "The medium-run and scale-up effects of performance-based financing: An extension of Rwanda’s 2006 trial using secondary data," World Development, Elsevier, vol. 139(C).
    7. Kolstad, Jonathan T. & Kowalski, Amanda E., 2016. "Mandate-based health reform and the labor market: Evidence from the Massachusetts reform," Journal of Health Economics, Elsevier, vol. 47(C), pages 81-106.
    8. Maria Apostolova‐Mihaylova & Aaron Yelowitz, 2018. "Health Insurance, Fertility, And The Wantedness Of Pregnancies: Evidence From Massachusetts," Contemporary Economic Policy, Western Economic Association International, vol. 36(1), pages 59-72, January.
    9. Fischer, Torben & Frölich, Markus & Landmann, Andreas, 2018. "Adverse Selection in Low-Income Health Insurance Markets: Evidence from a RCT in Pakistan," IZA Discussion Papers 11751, Institute of Labor Economics (IZA).
    10. Jeffrey Clemens, 2015. "Regulatory Redistribution in the Market for Health Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 109-134, April.
    11. Julie Shi, 2016. "Income Responses to Health Insurance Subsidies: Evidence from Massachusetts," American Journal of Health Economics, MIT Press, vol. 2(1), pages 96-124, January.
    12. Naoki Aizawa & Hanming Fang, 2015. "Equilibrium Labor Market Search and Health Insurance Reform, Second Version," PIER Working Paper Archive 15-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jun 2015.
    13. Fang, H., 2016. "Insurance Markets for the Elderly," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 237-309, Elsevier.
    14. Amanda Kowalski, 2014. "The Early Impact of the Affordable Care Act, State by State," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 277-355.
    15. Andrew Beauchamp & Mathis Wagner, 2012. "Dying to Retire: Adverse Selection and Welfare in Social Security," Boston College Working Papers in Economics 818, Boston College Department of Economics, revised 15 Aug 2013.
    16. Patricia H. Born & E. Tice Sirmans, 2020. "Restrictive Rating and Adverse Selection in Health Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 919-933, December.
    17. Martin B. Hackmann & Jonathan T. Kolstad & Amanda E. Kowalski, 2015. "Adverse Selection and an Individual Mandate: When Theory Meets Practice," American Economic Review, American Economic Association, vol. 105(3), pages 1030-1066, March.
    18. Olivier Darmouni & Dan Zeltzer, 2022. "Horizon effects and adverse selection in health insurance markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 800-827, May.

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform (AER 2012) in ReplicationWiki

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