Nonprofit Behavior Altered by Monetary Donations: Evidence from the U.S. Hospice Industry (with Lei Guo and Yang Li, European Journal of Health Economics, 2023) 

This study investigates whether reliance on monetary donations alters nonproft frms’ behaviors. Specifcally, in the hospice industry, a shorter patients’ length of stay (LOS) speeds up overall patient turnover, allowing a hospice to serve more patients and expand its donation network. We measure hospices’ donation reliance using the donation–revenue ratio, which indicates the importance of donations for revenue structure. By exploiting the supply shifter of donation, we adopt the number of donors as an instrument to control for the potential endogeneity issue. Our result suggests that a one-percentage-point increase in the donation–revenue ratio decreases patient LOS by 8%. Hospices that are more reliant on donations serve patients diagnosed with diseases that have shorter life expectancies to achieve a lower average LOS of all patients’ stay. Overall, we find that monetary donations alter the behavior of nonproft organizations.

Filial Piety Matters: A Study of Intergenerational Supports and Parental Health (with Yang Li, SSM: Population Health, 2022)

Eldercare has become a major challenge in China. As intergenerational support from children remains the primary source of caregiving, this paper investigates the impact of such support on parents' health outcomes. Exploiting data from the China Health and Retirement Longitudinal Study (CHARLS), we adopt the Heckman selection model and ordered probit model with instrumental variables, the firstborn son and firstborn daughter, to control for the potential endogeneity existing between intergenerational support and parents' health outcomes. Our results suggest that intergenerational support, including emotional and financial support, is effective in improving parental health status, including physical and psychological well-being and performance of activities of daily living (ADL) and instrumental activities of daily living (IADL). Emotional support also improves parental cognition. Children have trade-offs between emotional and financial support. Our findings provide insight into more efficient healthcare for the elderly.

The ACA Medicaid Expansion: Increased Utilization but Reduced Care Quality in Nursing Homes [PDF]

This study explores the impact of Medicaid expansion on the nursing home industry within the United States, with a specific focus on changes in facility utilization and the quality of care provided. By employing a difference-in-difference (DiD) methodology, I quantify the impact of Medicaid expansion at the nursing home level, uncovering a pronounced augmentation in Medicaid-covered patient-days post-expansion. Concurrently, this analysis detects a reduction in registered nurse (RN) staffing hours per patient-day, which may herald a deterioration in the quality of care. To elucidate the underlying mechanisms of Medicaid expansion, I further apply a difference-in-difference-in-difference (DDD) model, which corroborates the findings from the DiD analysis. Significantly, the DDD results associate the observed decline in care quality directly with the increased usage of services covered by Medicaid. These insights bear critical policy implications, highlighting the imperative to reconcile the expansion of care access with the preservation of service quality in nursing homes.

Distorted Behavior When Revenue Becomes Capped: Evidence from China's Reimbursement Constraint in Hospitalization (with Yuxi Dong and Ning Zhang) [PDF]

High medical expenditure is a problem in the health care industry. This paper examines the effeteness of the global budget (GB) policy in China that aims to cap the reimbursement amount and thus to control the medical expenditure in the inpatient sector. Using a unique administrative patient-level data set from 2015 to 2016, we analyze the policy effect by a Difference-in-Difference (DiD) model. We find while there is a reduction effect in reimbursement, out-of-pocket expenses raise due to the GB policy. Furthermore, we find the evidence of spill-over effect that outpatient, the unregulated sector, also emerges a sharp raise in medical expenditure. Besides, our results suggest that the reimbursement cap leads to an increased intensity of treatment. We conclude that the GB policy with reimbursement constraint distorts hospitals' behaviors, causing an opposite effect over what it is aimed to be.

Long-term Care Insurance and Household Living Expenditures: Evidence from China (with Terence Cheng, Yang Li and Minghao Wu) [PDF]

We examine how the benefit design of China's long-term care (LTC) program influences household consumption, and the receipt of financial support and informal care. China’s long-term care insurance (LTCI) pilot program offers beneficiaries two types of benefits: in-kind benefits covering services, and a cash allowance. We introduce a conceptual framework examining household utility maximization decisions under the two types of LTCI benefits. An empirical analysis is undertaken that leverages the difference in LTCI benefit design across cities using a difference-in-differences framework and applied to household data from China. Our results indicate that `mixed' benefits households -- those who have a choice between in-kind and cash benefits -- significantly increase their expenditure on food and housing, whereas households who receive in-kind benefits increase their expenditure on housing, transport and clothing. Beneficiaries of both types of benefits reduce medical related expenditure, signaling a substitution away from medical services towards formal and informal LTC services. We also find that beneficiaries who receive solely in-kind LTCI benefits reported a reduction in the amount of informal care provided by children, suggesting a substitution of formal care for informal care. Receiving mixed LTCI benefits results in a significant reduction in the amount of financial support that an elderly household receives, indicating that cash benefits crowds out financial transfers from children. Understanding how beneficiaries respond to different types of LTCI benefits can provide valuable insights for formulating policies on how to best design public LTC programs.

The Spillover Effect of China's Outpatient Cost-sharing Policy on the Hospitalization Sector (with Xiaoxiao Yan, Yuxi Dong, Yang Li, and Na Liu) [PDF upon Request]

This study examines the effects of a patient costing-sharing policy on inpatient expenditure in China. By exploiting a quasi-experiment on the outpatient mutual-aid guarantee mechanism, we implement a difference-in-difference approach to analyze the effects of the policy. Our analysis reveals that following the policy change, total inpatient expenditure and out-of-pocket inpatient expenditure decreased by 290 RMB and 223 RMB respectively. Outpatient and inpatient care are substitutes, and the reduction in cost-sharing could reduce excessive demands for inpatient care. Furthermore, the effects are larger for the admissions of Ambulatory Care Sensitive Conditions and diseases treated with medication or bed rest, these diseases could be treated through primary care and prevent avoidable hospitalization. Additionally, patients over age 60 are more sensitive to the reduction in cost-sharing, and patients in tertiary hospitals exhibit greater responsiveness. 

Medical Expenses When Retirement is Near: A Forward-looking Incentive and Evidence in China (with Ning Zhang, Xin Cai and Yuxi Dong) [PDF upon Request]

This paper utilizes the theory of behavioral economics to investigate the impact of differences in social security levels before and after retirement on the medical behavior of workers. The study first deduces, through a hyperbolic discounting model, that workers anticipate a non-linear decline in social security levels after retirement will engage in compensatory medical consumption in advance; this consumption will increase as the gap in social security after retirement widens,  and will intensify as the retirement approaches. Building on this theoretical foundation, the paper empirically studies the impact using a regression-discontinuity design based on non-public patient-level data from four cities in Province A provided by the Center for Health Reform and Development Research. The results indicate that compared to male workers outside the system, male workers within the system are more likely to engage in compensatory medical consumption before retirement, primarily manifested in increased expenditures on medication, examinations, and tests for hospitalized patients, with no significant changes in surgical costs or length of hospital stay. Additionally, as overall reimbursement expenses increase, out-of-pocket costs also significantly increase, ruling out motivations based on moral hazard. The study confirms the existence of irrational compensatory consumption behavior among workers within the system in terms of medical resource utilization, providing policy recommendations for retirement-related social security design in the context of China's aging population trend.

Moral Hazard in Physician Prescribing Behavior: Evidence from China’s Zero-Markup Policy (with Yuxi Dong, Yang Li, and Ning Zhang) [PDF]

In this study, we investigate the moral hazard associated with physician prescription patterns in the context of China's Zero-Markup Policy (ZMP), which annuls markups on Western medications while exempting Traditional Chinese Medicine (TCM). Using a distinctive dataset of administrative records, we investigate the influence of patient insurance status on the consumption of drugs, with a discerning focus on the disparate utilization of Western drugs and TCM. Our empirical results reveal a pattern in which insured patients exhibit increased expenditure on TCM and decreased outlay on Western drugs relative to their uninsured counterparts, suggesting that physicians are incentivized to prescribe profit-generating TCM rather than Western drugs with zero markup. A heterogeneity analysis confirms the consistency of these findings across varied health insurance schemes and a pronounced tendency among patients aged over 30. Our findings illuminate the dynamics of provider-induced demand in the pharmaceutical sector under China's ZMP, contributing to the discourse on policy-induced perverse incentives in healthcare provisioning.

Supply Expansion of Long-term Support & Service: Evidence from China's Long-term Care Insurance Pilot (with Yang Li and Wendan Zhang) [PDF]

The relatively small size of long-term support & services (LTSS) in the health care sector is inefficient while the world-wide demand of LTSS is growing. This paper investigates how a public long-term care insurance (LTCI) incentivizes the supply in the LTSS industry. We estimate a structural model of entry game with discrete location choice to analyze entrants' behavior using China's business administrative data. Our structural parameters suggest that the entry cost of LTSS industry is extremely high, but China's LTCI pilot generates considerable profitability to incentivize entry. We also find that, after the pilot policy, the market profitability is not constrained by entry barrier but constrained by firms’ competition instead.

Random Inspection and Quality of Care: Dynamic Enforcement in the Nursing Home Industry (with Wendan Zhang)

The inefficient quality of care in the U.S. nursing home industry has been a concern for decades. The center of Medicare and Medicaid (CMS) conducts random inspections to enforce quality improvement. We estimate a dynamic discrete choice model on nursing homes' investment in the quality of care, taking the random inspection as given, to minimize the long-run cost for compliance. Using the nationwide facility-quarter level data from 2014 to 2018, our structural model suggests the investment cost is approximate $31.12 thousand. Linking our data with literature, we find the average gain in consumer surplus in a nursing home is about $113.69 thousand due to an investment. Our analyses imply that such quality investment boosts social welfare extensively.

Advanced Education and Industrial Development: Evidence from China's Insurance Market (with Xin Cai)

This paper investigates how advanced education of insurance major promotes the development of the insurance industry. Using city-year level data, our two-stage least square results demonstrate a positive effect of advanced education on the development of the industry. These patterns hold across different tires of advanced education. Our findings have policy implications seeking to enhance industry performance through targeted educational initiatives.

Dynamic Impacts of Information Exposure: The Notification Push and Commercial Insurance Take-up (with Ze Chen, Runhuan Feng, and Tianyang Wang)

Quality of Management: Evidence from Hospital Financial Status and Frequency of Making Mistakes in Digital Operation (with Xin Cai, Yuxi Dong, and Minghao Wu)

Insurers' Over-competition and Market Consequences (with Wenpu Ma and Wenhao Li)