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Fiscal Shenanigans, Targeted Federal Health Care Funds, and Patient Mortality

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  • Katherine Baicker
  • Douglas Staiger

Abstract

The federal government spends billions of dollars each year on programs designed to increase the resources available to hospitals that serve the poor. This paper explores the intended and unintended effects of such targeted funds. First, how do these funds distort the behavior of state and local governments who wish to appropriate the funds for other uses? Second, to the extent that these funds do increase resources in the targeted hospitals, do patients benefit? We use the rapid and uneven growth in Medicaid Disproportionate Share Hospital (DSH) payments across states and hospitals to answer these questions. We identify states that were most able to appropriate DSH funds and show that, while DSH payments to public hospitals in these states were systematically diverted, DSH payments to other hospitals and in other states were not diverted. Additional resources that were made available to hospitals (rather than appropriated by the state) were associated with significant declines in infant and post-heart attack mortality. A range of evidence suggests that these improvements were due to better hospital care. Overall, our analysis implies that public subsidies can be an effective mechanism for improving medical care and outcomes for the poor, but that the impact is limited by the ability of state and local government to divert the targeted funds.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10440.

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Date of creation: Apr 2004
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Publication status: published as Baicker, Katherine and Douglas Staiger. "Fiscal Shenanigans, Targeted Federal Health Care Funds, And Patient Mortality," Quarterly Journal of Economics, 2005, v120(1,Feb), 345-386.
Handle: RePEc:nbr:nberwo:10440

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  1. 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.
  2. David M. Cutler & Ellen Meara, 2000. "The Technology of Birth: Is It Worth It?," NBER Chapters, in: Frontiers in Health Policy Research, Volume 3, pages 33-68 National Bureau of Economic Research, Inc.
  3. Hope Corman & Theodore Joyce & Michael Grossman, 1987. "A Cost-Effectiveness Analysis of Strategies to Reduce Infant Mortality," NBER Working Papers 2346, National Bureau of Economic Research, Inc.
  4. Nicholson, Sean & Song, David, 2001. "The incentive effects of the Medicare indirect medical education policy," Journal of Health Economics, Elsevier, Elsevier, vol. 20(6), pages 909-933, November.
  5. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers 7789, National Bureau of Economic Research, Inc.
  6. Cutler David M. & Meara Ellen, 2000. "The Technology of Birth: Is It Worth It?," Forum for Health Economics & Policy, De Gruyter, De Gruyter, vol. 3(1), pages 1-37, January.
  7. Kominski, Gerald F. & Long, Stephen H., 1997. "Medicare's disproportionate share adjustment and the cost of low-income patients," Journal of Health Economics, Elsevier, Elsevier, vol. 16(2), pages 177-190, April.
  8. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1263-96, December.
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Cited by:
  1. Yu-Chu Shen & Karen Eggleston, 2008. "The Effect of Soft Budget Constraints on Access and Quality in Hospital Care," NBER Working Papers 14256, National Bureau of Economic Research, Inc.
  2. Mark McClellan & Jonathan Skinner, 1997. "The Incidence of Medicare," NBER Working Papers 6013, National Bureau of Economic Research, Inc.
  3. Claudio Ferraz & Frederico Finan & Diana B. Moreira, 2012. "Corrupting Learning: Evidence from Missing Federal Education Funds in Brazil," NBER Working Papers 18150, National Bureau of Economic Research, Inc.
  4. Daysal, N. Meltem, 2012. "Does Uninsurance Affect the Health Outcomes of the Insured? Evidence from Heart Attack Patients in California," IZA Discussion Papers 6418, Institute for the Study of Labor (IZA).
  5. Evans, William N. & Owens, Emily G., 2007. "COPS and crime," Journal of Public Economics, Elsevier, Elsevier, vol. 91(1-2), pages 181-201, February.
  6. Eric Zitzewitz, 2012. "Forensic Economics," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 50(3), pages 731-69, September.
  7. Jeffrey Clemens & David M. Cutler, 2013. "Who Pays for Public Employee Health Costs?," NBER Working Papers 19574, National Bureau of Economic Research, Inc.
  8. Marianne P. Bitler & Madeline Zavodny, 2014. "Medicaid: A Review of the Literature," NBER Working Papers 20169, National Bureau of Economic Research, Inc.
  9. Ferraz, Claudio & Finan, Frederico & Moreira, Diana B., 2012. "Corrupting learning," Journal of Public Economics, Elsevier, Elsevier, vol. 96(9-10), pages 712-726.
  10. Anthony T. Lo Sasso & Bruce D. Meyer, 2006. "The Health Care Safety Net and Crowd-Out of Private Health Insurance," Working Papers, Harris School of Public Policy Studies, University of Chicago 0417, Harris School of Public Policy Studies, University of Chicago.
  11. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(5), pages 837-880, October.
  12. Ginger Zhe Jin & Alex Whalley, 2007. "The Power of Attention: Do Rankings Affect the Financial Resources of Public Colleges?," NBER Working Papers 12941, National Bureau of Economic Research, Inc.
  13. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, Elsevier, vol. 96(11), pages 1079-1091.

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