Research Interests:
Insurance Economics, Hospital/Emergency Medical Services Finances, 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 explore how hospitals adjust their investment decisions in response to changes in tail risk, assessing the 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) [Slides]
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) [Slides]
Formerly: "Firm Investment in the Face of Tail Risk: Evidence from Hospitals"
Abstract
We examine how organizations navigate investment decisions when confronted with tail risk -- the small possibility of extreme financial loss. We focus on hospital investments in trauma centers faced with medical malpractice risk. We focus on hospitals for three reasons: first, medical malpractice insurance inherently leaves hospitals exposed to substantial tail risk; second, the consequential financial stakes of medical liability for hospitals are quite large; and third, while trauma centers are financially beneficial, they are also exceptionally susceptible to tail risk given the critical nature of their services. For identification, we exploit the staggered adoption of caps on non-economic damages across states from 1991 to 2011, treating this as a quasi-random modulation of tail risk. These caps impose a ceiling on potential awards in malpractice lawsuits, thereby attenuating the tail risk. Employing a staggered synthetic control methodology, we find a 25% increase in the likelihood that a hospital has a trauma center following the reduction of tail risk. This effect is predominantly driven by non-profit hospitals and new investments (i.e., trauma center openings) rather than disinvestment (i.e., decrease in trauma center closures), indicating a one-sided response to decreased tail risk. We demonstrate that this increased presence of trauma centers is associated with a 3% reduction in traffic fatalities, with more pronounced effects in areas prone to mass casualty incidents. The timing of health improvements aligns closely with the increase in trauma centers, suggesting a direct link between hospital investment decisions and improved public health outcomes.
Research In Progress:
Crowd-Out and Hospital Financials (with Lawrence Powell)
Does Charitable Care Crowd Out Health Insurance? (with Johannes G. Jaspersen)
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)