Colleen Marie Carey
Assistant Professor of Policy Analysis and Management
Cornell University

An economist by training, my research focuses on the industrial organization of health care, with special attention to federal regulation of health insurance markets. Previously, I was a Robert Wood Johnson Scholar in Health Policy Research at the University of Michigan and a Staff Economist at the Council of Economic Advisers.

My research informs the design of publicly-subsidized health insurance markets such as the Affordable Care Act marketplaces.  I am particularly interested in the success of federal regulations, such as reinsurance and risk adjustment, in neutralizing adverse selection in these markets.  In other research, I have studied how the financial relationships between physicians and drug firms affect prescribing behavior, and the success of state policies that aim to interdict prescription opioid abuse.  

Working Papers
In a pervasive but controversial practice, drug firms frequently make monetary or in-kind payments to health care providers.  Critics are concerned that drug firms are distorting prescribing behavior away from the best interests of patients, while defenders of the practice claim that payments arise from the need to educate providers about changing drug technologies. Using two different identification strategies, we investigate the effect of payments from drug firms on patient-level prescribing behavior in Medicare Part D. We find that patients whose prescribers receive payments from a drug firm tend to increase expenditure on that firm's drugs. Our methods account for the selection of prescribers into payments (which may result if, e.g., pharmaceutical firms target payments to high volume prescribers) and our finding holds even when we look over time within patients who move residences and change to a new prescriber.  However, using hand-collected efficacy data on four major therapeutic classes, we also find that those receiving payments prescribe higher-quality drugs on average.  In addition, we examine four case studies of major drugs going off patent. Prescribers receiving payments from the firms experiencing the patent expiry transition their patients just as quickly to generics as prescribers who do not receive such payments. Our results have implications for the regulation of interactions between drug firms and physicians such as the Physician Payments Sunshine Act. 

In many federally-subsidized insurance markets, insurers are paid on the basis of enrollee diagnoses; in principle, insurers are indifferent between individuals with different diagnoses due to this system of diagnosis-specific payments. Between 2010 and 2011, the diagnosis-specific payment system in Medicare Part D was revised, sharply changing the subsidy for each diagnosis. This research uses the response of insurers to the payment update to estimate pass-through of government subsidies to consumer benefits. We first document that, consistent with prior theory, Part D insurers improved benefits for drugs that treat diagnoses with positive payment updates; conversely, insurers made coverage for diagnoses receiving negative payment updates less generous. We compute that an extra dollar in diagnosis-specific payments reduced out-of-pocket costs for the typical enrollee by about $0.20. We document heterogeneity in the pass-through rate across insurer market share, market concentration, and the market power of upstream drug firms. We also show insurers' response to the revision's improved alignment between payments and expenditures. Finally, we leverage the payment system revision to obtain a new estimate of prescription drug demand elasticity.

Health Policy