Working Paper: NBER ID: w31559
Authors: Maggie Shi
Abstract: This paper examines the tradeoffs of monitoring for wasteful public spending. By penalizing unnecessary spending, monitoring improves the quality of public expenditure and incentivizes firms to invest in compliance technology. I study a large Medicare program that monitored for unnecessary healthcare spending and consider its effect on government savings, provider behavior, and patient health. Every dollar Medicare spent on monitoring generated $24–29 in government savings. The majority of savings stem from the deterrence of future care, rather than reclaimed payments from prior care. I do not find evidence that the health of the marginal patient is harmed, indicating that monitoring primarily deters low-value care. Monitoring does increase provider administrative costs, but these costs are mostly incurred upfront and include investments in technology to assess the medical necessity of care.
Keywords: No keywords provided
JEL Codes: H00; H51; H53; I00; I10; I11; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| RAC audits (R50) | Medicare spending on admissions (H51) |
| RAC audits (R50) | unnecessary admissions (Y40) |
| monitoring (E63) | low-value admissions (I24) |
| monitoring (E63) | patient health outcomes (I14) |
| RAC audits (R50) | compliance technology investment (O33) |
| compliance technology investment (O33) | medical necessity assessment (I13) |