Research Interests:
Healthcare Financing, Insurance Economics, Risk/Uncertainty and Investment, Health Economics, Public Policy Analysis
Current Research:
My research investigates how insurance status, reimbursement policies, and regulatory changes shape healthcare provision, the financial resilience of healthcare providers, and patient outcomes. My current work centers on:
Healthcare Utilization and Financial Incentives: I examine the dynamics of emergency medical services, particularly how policy shifts like Medicaid expansion and private equity investments in ambulance services influence financial outcomes and patient health. My research has uncovered how Medicare's reimbursement structures lead to moral hazard among both consumers and providers, intensifying ambulance usage and upcoding practices, with significant spillover effects on emergency departments.
Hospital Financial Strategy and Risk Management: I disentangle the source of nonprofit risk aversion (donors or managers), focusing on US hospitals, and assess the implications for investment decisions with implications for patient health. This includes how Medicaid expansion interacts with state-level charity care mandates, impacting hospital finances.
Insurance Market Dynamics and Policy Implications: My research on moral hazard extends to insurance markets, where I analyze how charity care policies influence insurance take-up (or “charity hazard”), and how moral hazard, compounded by subsidies and community rating, can mimic adverse selection, posing challenges to insurance market stability.
Published Work:
Ellis, Cameron M., and Meghan I. Esson. (2021) ``Crowd-Out and Emergency Department Utilization.'' Journal of Health Economics, 80, 102542. https://doi.org/10.1016/j.jhealeco.2021.102542
Berry-Stölzle, Thomas R., and Meghan I. Esson. (2023) “Capital issuances and premium growth in the property-liability insurance industry: evidence from the financial crisis and COVID-19 recession.” The Geneva Papers on Risk and Insurance - Issues and Practice. https://doi.org/10.1057/s41288-022-00283-5
Working Papers:
Moral Hazard on the ACA Exchanges: Evidence from a Cost-Sharing Subsidy Discontinuity (with Cameron M. Ellis and Eli Liebman) Revise and Resubmit (Journal of Risk and Insurance)
Abstract
This paper examines the moral hazard effects of cost-sharing subsidies in the Affordable Care Act's Health Insurance Exchanges. Exploiting a sharp discontinuity in subsidy generosity at 150% of the federal poverty level, we compare healthcare spending for individuals just above and below this threshold using a regression discontinuity design and data from the Medical Expenditure Panel Survey. We find that individuals just below 150% FPL who receive the most generous subsidies spend approximately $1,700 more annually on healthcare compared to those just above the threshold receiving less generous subsidies, implying an elasticity of -0.48. Several analyses suggest this discontinuity reflects moral hazard rather than adverse selection or health differences across the income threshold. The results highlight a significant impact of moral hazard induced by generous cost-sharing subsidies, with important implications for the design of means-tested health insurance subsidies.
Incentive Misalignment in Ambulance Reimbursement: An Analysis of Medicare Payment Systems (Single-Authored) Revise and Resubmit (Management Science)
Formerly: "It's an Emergency: Do Medicare Reimbursement Rules Increase Unnecessary Ambulance Transports?"
Abstract
Medicare's ambulance reimbursement policies require (1) patient transportation and (2) medical necessity for reimbursement. Using over 7.7 million 911 EMS activations and a regression discontinuity design at the age 65 Medicare eligibility threshold, I find that these policies misalign incentives, leading to increased ambulance transports and upcoding. Conservatively, Medicare's transportation requirement led to 36,500 extra transports annually and has cost Medicare an estimated $350 million over 5 years. Additionally, Medicare's medical necessity criterion results in strategic upcoding by providers, with patients being more likely to be assigned condition codes that are reimbursable by Medicare but difficult to verify at the hospital, while no consistent change is observed for codes that are both reimbursable and easily verifiable. This practice introduces significant inefficiencies in emergency departments through unnecessary testing and improper triaging, which can be costly to insurers and negatively impact patient health. These findings have significant policy implications for the efficient functioning of emergency medical services, highlighting the need to reevaluate Medicare's reimbursement approach to better align provider incentives with patient care, mitigate moral hazard, and control costs.
Moral Hazard Induced Unraveling: Theory and Evidence from the Affordable Care Act (with Cameron M. Ellis and Eli Liebman) Revise and Resubmit (Journal of Risk and Insurance)
Abstract
We identify and quantify a new form of welfare loss in insurance markets. We first show theoretically that moral hazard from subsidies for cost-sharing combined with community rating mimics adverse selection and can unravel insurance markets. To quantify the potential welfare loss, we use exogenous variation in the number of subsidized enrollees on the ACA exchanges. We find that subsidy-induced moral hazard led to higher premiums, which has lowered enrollment among the unsubsidized by 7.6 percentage points. We estimate the welfare costs of this "moral hazard-induced unraveling" to be around 25% of the welfare loss from existing adverse selection.
Price Regulation and Cream-Skimming: How Private Equity Competes with Government-Backed Firms (with Cameron M. Ellis)
Formerly: "Private Equity in Public-Provider Markets: Operating Efficiency vs. Cream-Skimming"
Abstract
We examine how private equity (PE) firms generate value in markets where they compete against government providers. Using novel data from Arizona's ambulance industry, we find PE-owned companies increase operating profits by 50% through cream-skimming: strategically exploiting regulations to shift unprofitable customers to the government while retaining high-profit customers. In the ambulance industry, they accomplish this by firing paramedics, which, due to nationwide staffing regulations, forces local fire departments to take the high-cost runs. This strategic reallocation of services only occurs where PE firms overlap with fire departments and impacts public health -- leading to 200 additional traffic fatalities in Arizona and a 7% increase nationally. Our findings demonstrate how PE profit maximization in mixed public-private markets can create substantial negative externalities for both public balance sheets and public health.
The Source of Nonprofit Risk Aversion: Theory and Evidence from Hospitals (with Jingshu Luo and Cameron M. Ellis)
Formerly: "Firm Investment in the Face of Tail Risk: Evidence from Hospitals"
Abstract
We show that donors, not managers, drive risk-averse behavior in nonprofit organizations (NPOs). Theoretically, when donor recognition is tiered (e.g., naming rights vs.\ thank-you cards), donors concentrate rather than diversify giving, making shadow donation capital costs sensitive to NPO-specific risk. This induces risk-averse actions even without risk-averse managers. We test our theory using hospitals and the staggered adoption of medical liability caps and find that reduced NPO risk increases donations. Effects on substitute bond-financing indicate this increase is supply- (donor-) driven, not demand- (manager-) driven. Liability caps lead nonprofit, but not for-profit, hospitals to expand risky investments, improving patient health.
Does Charitable Care Crowd Out Health Insurance? (with Johannes G. Jaspersen)
Abstract
We investigate whether state charity care laws, which require hospitals to provide free or discounted emergency care to low-income patients, unintentionally crowd out private health insurance. Exploiting the staggered adoption of these laws across US states, we find that charity care policies increase the uninsured rate by one percentage point (6%), with effects concentrated exclusively among individuals whose income makes them potentially eligible for charity care and who live in metropolitan areas with greater hospital access. These results underscore the importance of designing safety-net policies that account for access to care and its unintended effects on coverage decisions..
Research In Progress:
Crowd-Out and Hospital Financials (with Lawrence Powell)
Mobile Simulation Training for EMS: Evaluating the Impact on Outcomes (with Jacinda Bunch, Cormac O'Sullivan, Brian Rechkemmer, and Tom Rietz)
Cost-Shifting and Competition (with Cameron M. Ellis and Ziyang Jiu)