Zarek C. Brot-Goldberg

Working Papers:

"Is There Too Little Antitrust Enforcement in the US Hospital Sector?" (with Zack Cooper, Stuart Craig, and Lev Klarnet)

[April 2024, forthcoming at American Economic Review: Insights]

[Final pre-publication manuscript, April 2024]

From 2002 to 2020, there were over 1,000 hospital mergers in the US. During this period, the Federal Trade Commission (FTC) took enforcement actions against 13 transactions. However, we find that 20% these mergers could have been predicted, using the FTC’s standard screening tools, to meaningfully lessen competition. We then show that, from 2010 to 2015, predictably anticompetitive mergers resulted in price increases over 5%. We estimate that approximately half of predictably anticompetitive mergers had to be reported to the FTC per the Hart-Scott-Rodino Act. We conclude that there appears to be underenforcement of antitrust laws in the hospital sector.

Media Coverage: Wall Street Journal, Axios, Stat

"Rationing Medicine Through Bureaucracy: Authorization Restrictions in Medicare" (with Samantha Burn, Timothy Layton and Boris Vabson) [January 2023, revisions requested at American Economic Review]

[NBER Working Paper No. 30878/BFI Working Paper No. 2023-08, January 2023]

High administrative costs in U.S. health care have provoked concern among policymakers over potential waste, but many of these costs are generated by managed care policies that trade off bureaucratic costs against reductions in moral hazard. We study this trade-off for prior authorization restriction policies in Medicare Part D, where low-income beneficiaries are randomly assigned to default plans. Beneficiaries who face restrictions on a drug reduce their use of it by 26.8%. Approximately half of marginal beneficiaries are diverted to another related drug, while the other half are diverted to no drug. These policies generated net financial savings, reducing drug spending by $96 per beneficiary-year (3.6% of drug spending), while generating approximately $10 in paperwork costs. Revealed preference approaches suggest that the cost savings likely exceed the value of the foregone drugs to patients. 

Media  Coverage:  Crain's Chicago Business, Medscape, AEIdeas, Becker's ASC Review, Tradeoffs, WBEZ, Fortune

"Who Pays for Rising Health Care Prices? Evidence from Hospital Mergers" (with Zack Cooper, Stuart Craig, Lev Klarnet, Ithai Lurie, and Corbin Miller)

[working paper coming in spring 2024]

This paper won an ASHEcon Program Chair Award in 2023.

"Privatizing Social Health Insurance: Medicare Advantage vs. Traditional Medicare" (with Yalun Su, Boris Vabson, Scott Bilder, Barton Jones, Iman Mohammadi, Zulkarnain Pulungan, and Christie Teigland)

[April 2024, public working paper coming soon!]

We have released three white papers containing preliminary results from this project:

White Paper #1: Who Enrolls in Medicare Advantage vs. Medicare Fee-for-Service

White Paper #2: Utilization and Efficiency Under Medicare Advantage vs. Medicare Fee-for-Service

White Paper #3: Quality Outcomes Under Medicare Advantage vs. Medicare Fee-for-Service

White Paper #4: The Importance of Plan Design in Medicare Advantage

The background on this project, as well as links to media coverage of the white papers, is given here.

Publications:

"The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D" (with Timothy Layton, Boris Vabson, and Adelina Yanyue Wang)

American Economic Review, 2023, 113(10), 2718-2758

[Final pre-publication manuscript, July 2023]

[NBER Working Paper No. 28331/BFI Working Paper No. 2021-03, January 2021]

We show in two natural experiments that default rules in Medicare Part D have large, persistent effects on enrollment and drug utilization of low-income beneficiaries. The implications of this phenomenon for welfare and optimal policy depend on the sensitivity of passivity to the value of the default option. Using random assignment to default options, we show that beneficiary passivity is extremely insensitive, even when enrolling in the default option would result in substantial drug consumption losses. A third natural experiment suggests that variation in active choice is driven by random transitory shocks rather than the inherent attentiveness of some beneficiaries.

Media Coverage: Commonwealth Fund, Healthcare Economist 

"What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics" (with Amitabh Chandra, Benjamin Handel, and Jonathan Kolstad)

Quarterly Journal of Economics, 2017, 132(3): 1261-1318

[Final pre-publication manuscript, January 2017] 

[Online Appendix]

[NBER Working Paper No. 21632, October 2015]

Measuring consumer responsiveness to medical care prices is a central issue in health economics and a key ingredient in the optimal design and regulation of health insurance markets. We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large self-insured firm which forced all of its employees to switch from an insurance plan that provided free health care to a non-linear, high deductible plan. The switch caused a spending reduction between 11.79%-13.80% of total firm-wide health spending. We decompose this spending reduction into the components of (i) consumer price shopping (ii) quantity reductions (iii) quantity substitutions, finding that spending reductions are entirely due to outright reductions in quantity. We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services). We then leverage the unique data environment to study how consumers respond to the complex structure of the high-deductible contract. We find that consumers respond heavily to spot prices at the time of care, and reduce their spending by 42% when under the deductible, conditional on their true expected end-of-year shadow price and their prior year end-of-year marginal price. In the first-year post plan change, 90% of all spending reductions occur in months that consumers began under the deductible, with 49% of all reductions coming for the ex ante sickest half of consumers under the deductible, despite the fact that these consumers have quite low shadow prices. There is no evidence of learning to respond to the true shadow price in the second year post-switch. 

Media Coverage: New York Times [Economic View], New York Times [The Upshot], Washington Post [Wonkblog], Washington Post [Health & Science], Vox [1], Vox [2], CBS Moneywatch, Marketplace, The Conversation

This paper won the 24th Annual NIHCM Foundation Research Award in 2018.

Work in progress:

"Pharmacy Benefit Managers and Vertical Relationships in Drug Supply" (with Catherine Che and Benjamin Handel)

[A very, very preliminary sketch of the model in this paper is described in NBER Working Paper No. 29959. A version of this working paper was published in "The Economics of US Healthcare: Competition, Innovation, Regulation, and Organizations."]

Media Coverage: St. Louis Post-Dispatch

"Productivity Spillovers, Common Agency, and the Underprovision of Hospital Performance Incentives" (with Scott Loring)

"Hospital Towns: Evidence from the Hill-Burton Act"

Resting papers:

"Intermediation and Vertical Integration in the Market for Surgeons" (with Mathijs de Vaan)

[Job market paper version] 

Health care markets are increasingly dominated by large, highly-integrated systems. Understanding the impact of this integration on market outcomes is central to designing good antitrust and regulatory policy. Integration presents a central efficiency trade-off: It may improve the productive efficiency of care through coordination between primary care providers (PCPs) and specialists, but it may also reduce allocative efficiency by enabling systems to steer PCPs’ referrals towards inefficient affiliated specialists. We study how these forces shape referrals to orthopedic joint surgeons in Massachusetts. We find evidence of both effects: Breaking health systems' vertical ties would reallocate nearly 40% of patients away from formerly-integrated orthopedists but, counterintuitively, would also increase expected costs by 5%. This aggregate effect masks substantive cross-system heterogeneity in both the size of the efficiency gain and the sign and extent of the allocative distortion.