The Incidence of Medicare

The Medicare program transfers more than $200 billion annually from taxpayers to beneficiaries. This paper considers the incidence of such transfers. First, we examine the net tax payments and program expenditures for individuals in different lifetime income groups. We find Medicare has led to net transfers from the poor to the wealthy, as a result of relatively regressive financing mechanisms and the higher expenditures and longer survival times of wealthier beneficiaries. Even with recent financing reforms, net transfers to the wealthy are likely to continue for at least several more decades. Second, we consider the insurance value of Medicare in providing a missing market for health insurance. With plausible parameter values, our simulations suggest that low-income elderly benefitted more than the dollar flows would suggest. Including this insurance value implies that, on net, there is faint redistribution from the highest income deciles to the lowest income deciles. We also consider the likely distributional impact of several proposed reforms in Medicare financing and benefits.

The Quality of Health Care Providers

Obtaining better information on the quality of health care providers is one of the most pressing issues in health policy today. In this paper we (1) develop a new method for measuring quality of care that overcomes the key limitations of available quality measures, and (2) apply this method to estimating the quality of hospital care for elderly patients with heart disease. Our approach optimally combines information from all available current and past quality indicators in order to more accurately estimate and forecast each provider's quality level. For patients with heart disease, the method is able to predict and forecast differences in patient outcomes across hospitals remarkably well - far better than existing methods. Our approach also provides an empirical basis for choosing among potential quality indicators. In particular, we find that differences across hospitals in short-term mortality rates following a heart attack, adjusted for patient demographics, are excellent indicators of quality of care: They vary dramatically across hospitals, are persistent over time, are highly correlated with alternative quality indicators, and are highly correlated with mortality rates that adjust more extensively for patient severity. Thus, comparing quality of care across providers may be far more feasible than many now believe.

The Effects of Hospital Ownership on Medical Productivity

To develop new evidence on the effects of hospital ownership and other aspects of hospital market composition on health care productivity, we analyze longitudinal data on the medical expenditures and health outcomes of the vast majority of nonrural elderly Medicare beneficiaries hospitalized for new heart attacks over the 1985-1996 period. We find that the effects of ownership status are quantitatively important. Areas with a presence of for-profit hospitals have approximately 2.4 percent lower levels of hospital expenditures, but virtually the same patient health outcomes. We conclude that for-profit hospitals have important spillover benefits for medical productivity.

The Effects of Malpractice Pressure and Liability Reforms on Physicians’ Perceptions of Medical Care

Considerable evidence suggests that the medical malpractice liability system neither provides compensation to patients who suffer negligent medical injury nor seeks to penalize physicians whose negligence causes patient injury. The relationship between liability reforms, malpractice pressure and physician perceptions of medical care is examined

Is More Information Better? The Effects of 'Report Cards' on Health Care Providers

Health care report cards - public disclosure of patient health outcomes at the level of the individual physician and/or hospital - may address important informational asymmetries in markets for health care, but they may also give doctors and hospitals incentives to decline to treat more difficult, severely ill patients. Whether report cards are good for patients and for society depends on whether their financial and health benefits outweigh their costs in terms of the quantity, quality, and appropriateness of medical treatment that they induce. Using national data on Medicare patients at risk for cardiac surgery, we find that cardiac surgery report cards in New York and Pennsylvania led both to selection behavior by providers and to improved matching of patients with hospitals. On net, this led to higher levels of resource use and to worse health outcomes, particularly for sicker patients. We conclude that, at least in the short run, these report cards decreased patient and social welfare.