Working Paper: NBER ID: w21513
Authors: Laurence C. Baker; M. Kate Bundorf; Daniel P. Kessler
Abstract: We test whether the generosity of employer-sponsored health insurance facilitates the exercise of market power by hospitals. We construct indices of health plan generosity and the price and volume of hospital services using data from Truven MarketScan for 601 counties from 2001-2007. We use variation in the industry and union status of covered workers within a county over time to identify the causal effects of generosity. Although OLS estimates fail to reject the hypothesis that generosity facilitates the exercise of hospital market power, IV estimates show a statistically significant and economically important positive effect of plan generosity on hospital prices in uncompetitive markets, but not in competitive markets. Our results suggest that most of the aggregate effect of hospital market structure on prices found in previous work may be coming from areas with generous plans.
Keywords: No keywords provided
JEL Codes: I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Health plan generosity (I13) | Hospital prices (I11) |
| Health plan generosity (I13) | Hospital admissions (I19) |
| Health plan generosity + Market competitiveness (I11) | Hospital prices (I11) |
| Health plan generosity + Hospital market power (I11) | Price variation (D46) |