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Public Health Insurance Expansions and Hospital Technology Adoption

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  • Seth Freedman

    (Indiana University)

  • Haizhen Lin

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Kosali Simon

    (Indiana University and NBER)

Abstract

This paper explores the effects of public health insurance expansions on hospitals’ decisions to adopt medical technology. Specifically, we test whether the expansion of Medicaid eligibility for pregnant women during the 1980s and 1990s affected hospitals’ decisions to adopt neonatal intensive care units (NICUs). While the Medicaid expansion insured a substantial number of pregnant women who would otherwise have been uninsured, prior literature also finds that some newly insured women would otherwise have been covered by more generously-reimbursed private sources. This leads to a theoretically ambiguous net effect of Medicaid expansion on a hospital’s incentive to invest in technology. Using American Hospital Association (AHA) data, we find that on average Medicaid expansions had no statistically significant effect on NICU adoption. However, we find that in geographic areas where more of the newly Medicaid-insured may have come from the privately insured population, Medicaid expansion slowed NICU adoption. This holds true particularly when Medicaid payment rates were very low relative to private payment rates. Our findings suggest that despite the fact that on average Medicaid expansions did not affect the proliferation of NICUs in the 1980s and 1990s, the Medicaid-induced shifts from private to public coverage slowed NICU adoption. This finding is consistent with prior evidence on reduced NICU adoption from increased managed care penetration. We conclude by providing suggestive evidence on the health impacts of this deceleration of NICU diffusion, and by discussing the policy implications of our work for insurance expansions associated with the Affordable Care Act.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2012-08-freedman-lin-simon.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2012-08.

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Date of creation: Oct 2012
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Handle: RePEc:iuk:wpaper:2012-08

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  1. Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc.
  2. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
  3. Currie, Janet & Gruber, Jonathan & Fischer, Michael, 1995. "Physician Payments and Infant Mortality: Evidence from Medicaid Fee Policy," American Economic Review, American Economic Association, vol. 85(2), pages 106-11, May.
  4. Sandra Decker, 2007. "Medicaid physician fees and the quality of medical care of Medicaid patients in the USA," Review of Economics of the Household, Springer, vol. 5(1), pages 95-112, March.
  5. Baker, Laurence C., 2001. "Managed care and technology adoption in health care: evidence from magnetic resonance imaging," Journal of Health Economics, Elsevier, vol. 20(3), pages 395-421, May.
  6. Jonathan Skinner & Douglas Staiger, 2005. "Technology Adoption From Hybrid Corn to Beta Blockers," NBER Working Papers 11251, National Bureau of Economic Research, Inc.
  7. Margaret E. Blume-Kohout & Neeraj Sood, 2008. "The Impact of Medicare Part D on Pharmaceutical R&D," NBER Working Papers 13857, National Bureau of Economic Research, Inc.
  8. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
  9. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 1-37, 02.
  10. Craig L. Garthwaite, 2011. "The Doctor Might See You Now: The Supply Side Effects of Public Health Insurance Expansions," NBER Working Papers 17070, National Bureau of Economic Research, Inc.
  11. Anna Aizer & Adriana Lleras-Muney & Mark Stabile, 2005. "Access to Care, Provider Choice, and the Infant Health Gradient," American Economic Review, American Economic Association, vol. 95(2), pages 248-252, May.
  12. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 527-564, May.
  13. Currie, Janet & Gruber, Jonathan, 2001. "Public health insurance and medical treatment: the equalizing impact of the Medicaid expansions," Journal of Public Economics, Elsevier, vol. 82(1), pages 63-89, October.
  14. Jeffrey Clemens, 2013. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," NBER Working Papers 19761, National Bureau of Economic Research, Inc.
  15. Janet Currie & Jonathan Gruber, 1997. "The Technology of Birth: Health Insurance, Medical Interventions, and Infant Health," NBER Working Papers 5985, National Bureau of Economic Research, Inc.
  16. Reagan Baughman, 2007. "Differential impacts of public health insurance expansions at the local level," International Journal of Health Care Finance and Economics, Springer, vol. 7(1), pages 1-22, March.
  17. Jonathan Gruber, 2008. "Covering the Uninsured in the United States," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 571-606, September.
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