We develop a framework to study optimal disability insurance when employers exhibit moral hazard. We show that the optimal system takes into account employer-side moral hazard and selective hiring. We illustrate these insights using a reform in the Netherlands that extended experience rating to temporary workers. Using this reform, we document a 24% decrease in disability inflow and an increase in worker selection, which could account for 14% of the overall decrease. Our model and results suggest that overall the policy improved welfare. Under some assumptions, experience rating should be further strengthened.
We merge the universe of 2000-2018 W-2 earnings records to the universe of 2000-2018 SSA-1099 forms to estimate the Social Security Disability Insurance (SSDI) claiming rate of each employer's employees. We document large variation across industries in claiming rates. We also show that SSDI claiming rates correlate with characteristics of firms that signal firm quality. There is a positive association between firm size and employee SSDI claiming, except for the largest firms, which have lower employee claiming rates. In addition, we document a negative association between employee wages and SSDI claiming. In future work, we will estimate the relationship between employer and employee wage premiums and SSDI claiming.
Some consumers lack the cash needed to pay for medical care. As a result, they either delay care until they can pay for it or they forgo the care altogether. To test for such a possibility, we study the distribution of monthly Social Security checks among Medicare Part D recipients. When Social Security checks are distributed, prescription fills increase by 6-12 percent. In that sense, drug consumption of low-income Medicare recipients is "liquidity sensitive.'' We then study recipients who transition onto a program that eliminates copayments. When those recipients do not face copayments, their drug consumption becomes less liquidity sensitive. That finding implies that, beyond risk protection, generous insurance also provides beneficiaries with the ability to consume healthcare when they need it rather than when they have cash. Further, we find that recipients whose drug consumption is most liquidity sensitive exhibit price elasticities of demand that are twice the size of the average elasticity, suggesting that the liquidity sensitive do not solely delay filling prescriptions until they have enough cash but also forgo prescriptions when they are illiquid. We present a stylized model that uses this finding to call into question the conventional interpretation of demand-response to price as solely moral hazard.
Exploiting a change in reporting defaults and the implied audit threat in Hungary, we demonstrate that a substantial portion of employees and the self-employed reporting to earn the minimum wage have much higher earnings in reality. This can be seen from their sharp but temporary jump to the new reporting default, a twofold increase in reported earnings, which quickly dissipates as enforcement does not follow. Misreporting is also consistent with the response concentrated both spatially and by employer, as well as with the anomalous covariate distributions around the threshold. Requiring these individuals to pay higher taxes or ask for explicit exceptions increases reported earnings for some and decreases formal employment for others, suggesting a trade-off for taxation. We formalize the empirical findings in a model of minimum wage taxation where earnings underreporting around the minimum wage would justify a move towards higher taxation of those earnings, more aligned with a prevalent international practice.
In this paper, we seek to unpack the variation in Medicaid spending across states using a novel empirical strategy. We leverage data describing demographics, fiscal spending, and mortality for the universe of Medicaid enrollees linked to similar data for the universe of Medicare enrollees. We use this data to allow us to compare fiscal spending and health effects of each state’s Medicaid program relative to a single, homogeneous alternative program: Medicare. By comparing each state’s Medicaid program to Medicare, we can effectively compare each state’s Medicaid program to each other state’s Medicaid program, allowing us to assess the extent to which program factors influence the variation in observed Medicaid spending across states.
Using mortality registers and administrative data on incomes and population, we develop new evidence on the magnitudes and sources of life expectancy inequality in Hungary. We document considerable inequality across geographies and income groups, and show that inequality has increased between 1991-2016. We show that avoidable deaths play a large role in life expectancy inequality. Income-related geographic inequalities in health behaviors, access to care, and healthcare use are all strongly correlated with the inequality in life expectancy.
Public health insurance benefits in the U.S. are increasingly provided by private firms. We assess the consequences of private provision by exploiting the staggered introduction of enrollment mandates across counties in Texas and New York, which required disabled Medicaid beneficiaries to shift to private health plans. In Texas, where the public program uses strict rationing to control costs, privatization led to higher Medicaid spending but also improvements in healthcare. In New York, where the public program is more generous, privatization did not affect Medicaid spending but resulted in a large decrease in inpatient admissions. We conclude that the consequences of private provision depend critically on the design of the public and private programs.
We use high-frequency Google search data, combined with data on the announcement dates of non-pharmaceutical interventions (NPIs) during the COVID-19 pandemic in U.S. states, to disentangle the short-run direct impacts of multiple different state-level NPIs in an event study framework. Exploiting differential timing in the announcements of restaurant and bar limitations, non-essential business closures, stay-at-home orders, large-gatherings bans, school closures, and emergency declarations, we leverage the high-frequency search data to separately identify the effects of multiple NPIs that were introduced around the same time. We then describe a set of assumptions under which proxy outcomes can be used to estimate a causal parameter of interest when data on the outcome of interest are limited. Using this method, we quantify the share of overall growth in unemployment during the COVID-19 pandemic that was directly due to each of these state-level NPIs. We find that between March 14 and 28, restaurant and bar limitations and non-essential business closures can explain 6.0% and 6.4% of UI claims respectively, while the other NPIs did not directly increase own-state UI claims. This suggests that most of the short-run increase in UI claims during the pandemic was likely due to other factors, including declines in consumer demand, local policies, and policies implemented by private firms and institutions.
Using administrative data on a random 50% of the Hungarian population, including individual-level information on incomes, healthcare spending, and mortality for the 2003-2011 period, we develop new evidence on the distribution of healthcare spending and mortality in Hungary by income and geography. By linking detailed administrative data on employment, income, and geographic location with measures of healthcare spending and mortality we are able to provide a more complete picture than the existing literature which has relied on survey data. We compute mean spending and 5-year and 8-year mortality measures by geography and income quantiles, and also present gender and age adjusted results.
We document four patterns: (i) substantial geographic heterogeneity in healthcare spending; (ii) positive association between labor income and public healthcare spending; (iii) geographic variation in the strength of the association between labor income and healthcare spending; and (iv) negative association between labor income and mortality. In further exploratory analysis, we find no statistically significant correlation between simple county-level supply measures and healthcare spending. We argue that taken together, these patterns suggest that individuals with higher labor income are in better health but consume more healthcare because they have better access to services.
Our work suggests new directions for research on the relationship between health inequalities and healthcare spending inequalities and the role of subtler barriers to healthcare access.
We use data on enrollment in the Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) program and data on health care spending by Medicaid beneficiaries to analyze the extent to which Medicaid spending is predictive of future disability insurance receipt among non-disabled teenagers and future disability insurance disenrollment among disabled teenagers. In our first set of analyses, we find that we currently do not have enough data to predict future SSI and SSDI enrollment among non-disabled teenagers. In our second set of analyses, we find that observed Medicaid spending among disabled teenagers can be used to predict SSI disenrollment. Our results indicate that machine learning models using information on healthcare spending may be useful for identifying current teenage SSI recipients who are more or less likely to be removed from SSI.
We study insurers’ use of prescription drug formularies to screen consumers in the ACA Health Insurance Exchanges. We begin by showing that Exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consumer types. A minority of consumers, identifiable by demand for particular classes of prescription drugs, are predictably unprofitable. We then show that contract features relating to these drugs are distorted in a manner consistent with multi-dimensional screening. The empirical findings support a long theoretical literature examining how insurance contracts offered in equilibrium can fail to optimally trade-off risk protection and moral hazard.
We systematically review the literature linking health to economic activity, particularly education and labor market outcomes, over the lifecycle. In the first part, we review studies that link childhood health to later-life outcomes. The main themes we focus on are in-utero exposures, birthweight, physical health and nutrition, mental health, and the environment. In the second part, we review studies of the impact of health on labor market success for adults. The main themes we focus on are the environment, disability, physical health shocks, within-household spillovers, cancer, and mental health.