Research
Research Interests:
Insurance Economics, Risk/Uncertainty and Investment, Hospital/Emergency Medical Services Finances, Health Economics, Public Policy Analysis
Current Research:
My research focuses on how health insurance access and reimbursement policies affect the provision and utilization of healthcare in the United States.
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 Induced Unraveling: Theory and Evidence from the Affordable Care Act (with Cameron M. Ellis and Eli Liebman) Under Review
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.
Moral Hazard on the ACA Exchanges: Evidence from a Cost-Sharing Subsidy Discontinuity (with Cameron M. Ellis and Eli Liebman)
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.
Abstract
Strict reimbursement rules stipulate that Medicare will only cover an ambulance encounter if the patient is transported to a hospital for a medically necessary reason. Using the 2012 to 2016 National Emergency Medical Services Information System data, I use a regression discontinuity at age 65 to determine how Medicare reimbursement rules impact the treatment and transport decision of an EMS provider, the final destination of a patient, and the use of condition codes that qualify transport by an EMS provider as medically necessary. I find that moral hazard increases the consumption of ambulance services by Medicare patients. I then find that to meet the reimbursement requirements of Medicare while also satisfying the legal restrictions of 911 encounters, EMS providers disproportionately transport Medicare-eligible patients to a hospital and upcode condition codes that qualify as medically necessary. These practices increased expenditures by $450 million over five years, with half due to upcoding.
Private Equity in Public-Provider Markets: Cost Efficiency vs. Cream-Skimming (with Cameron M. Ellis)
Abstract
We examine the cost-cutting strategies employed by private equity (PE) firms in public goods markets. We use the ambulance industry as a laboratory since price and choice regulation limits other avenues of increasing profitability. We exploit the staggered acquisition of the two largest national private ambulance companies and detailed operations and cost data from all Arizona ambulance operators in a staggered difference-in-differences design to discern whether PE firms enhance profits through operational efficiencies or by selectively serving lower-cost consumers (cream-skimming). We find a 40% increase in profit among PE firms, driven entirely by cream-skimming from fire departments. We identify the specific mechanism of cream-skimming -- firing the paramedics required to operate high-cost runs. These runs are then shifted to fire departments. This cream-skimming behavior leads to a 7% increase nationally in fatalities from traffic accidents in areas serviced by PE-owned ambulances. We highlight the complex implications of PE investment in public services, where cost-cutting measures to increase profitability may compromise public health outcomes and public provider balance sheets.
Firm Investment in the Face of Tail Risk (with Jingshu Luo)
Abstract
We examine how firms 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.
Research In Progress:
Crowd-Out and Hospital Financials (with Cameron M. Ellis and Lawrence Powell)
Charity Hazard in Healthcare: Evidence from Hospital Charity Care Policies
Merger She Wrote: Ambulance Competition and Traffic Fatalities
Public Insurance and Ambulance Diversion: Is Insurance Access Overloading Emergency Departments? (with Cameron M. Ellis)