Health Insurance and Hospital Supply

Large-scale health insurance expansions can improve individual outcomes and increase the availability of health-care services in underserved areas. We explore the effects of a large health-care program in 1950s Appalachia. The program insured hundreds of thousands of coal mining families and built new, high-quality hospitals in the area. We can separately identify the effect of health insurance from the combined effect of the insurance plus new hospitals. We use difference-in-differences to analyze effects on health-care access and health outcomes. The insurance alone increased hospital birth rates by 3 percent and reduced infant mortality by 2 percent in the average county (over 25 percent of the gap between Appalachia and the rest of the United States). The combination of the insurance and new hospitals increased hospital beds by 80 percent and crowd-out was limited, but results on infant mortality are inconclusive. Our results are consistent with the idea that a large insurance expansion can increase health access and improve health outcomes for certain types of basic care. However, a large insurance expansion alone may not be enough to spur investment in more advanced care that is less likely to be available in underserved areas.