"The Economic Impact of Public Capital: Evidence from Chinese Prefectures and Firms" (with Jing Zhang)
2022, Regional Science and Urban Economics, 97, 103818
Optimal Payment Levels for Reference-Dependent Physicians
with Zhi Cao, Junjian Yi, Hang Zou, and Chuanchuan Zhang
Abstract: We develop and structurally estimate a collective model of medical decision-making that incorporates physicians’ reference-dependent preferences. Our estimates show that both patients and physicians actively shape medical decisions, and that physicians place 3.5 times more weight on perceived losses than on gains. Under prospective payment policies, the payment level fixed in advance is a key determinant of treatment and welfare outcomes because it shapes physicians’ perceptions of gains and losses. Based on structural estimates, we quantify the welfare effects of physicians’ loss aversion and derive the optimal payment level that reduces overall healthcare expense while preserving patient health benefits. Our findings provide broad implications for the design of prospective payment policies, which are widely used across sectors.
Hospital Discharge: Model, Estimates, and Policy Analyses
with Zhi Cao, Yan Chen, Junjian Yi, and Hang Zou
- Revise & Resubmit, American Economic Journal: Microeconomics.
Abstract: Hospital discharge decisions involve both physicians and patients, entail information asymmetry, and occur in dynamic contexts. While physicians care about patients, their preferences over the trade-off between out-of-pocket expense and patient health benefits may diverge. We develop and estimate a model of discharge decisions that incorporates these features. The model disentangles the effects of patients’ financial incentives, physicians’ altruistic and financial incentives, and preference inconsistency on treatment and welfare outcomes. We find all three incentives increase healthcare expense, while preference inconsistency reduces it. Using model estimates, we explore policies that could manage expense and improve welfare, without reducing physician revenue.
Hospital Heterogeneous Responses to a Blended Payment Reform and the Distributional Consequences
with Hanmo Yang, Junjian Yi, and Chuanchuan Zhang
- Revise & Resubmit, International Economic Review.
Abstract: Hospital payment schemes designed to control health expenditure could also influence the allocation of medical resources, which is crucial for efficient healthcare delivery. This paper studies the effects of hospital responses to the introduction of a blended payment scheme—a diagnosis-based payment scheme with a predetermined global budget cap—and the distributional consequences of hospital heterogeneous responses. Exploiting a quasi-experimental reform in China in 2016, we find hospitals responded along multiple dimensions: upcoding, shifting admissions toward categories with higher upcoding potential, and increasing the total number of admissions. Hospitals’ heterogeneous responses led to a widened disparity in hospital payments, which is mainly driven by heterogeneous upcoding across hospitals. Hospitals with more knowledge about coding practices, greater exposure to the reform, higher tier (administrative classification by size, capability, and service level), and larger size respond more strongly to the reform, therefore securing a greater budget share from the social health insurance fund.
Estimating an Equilibrium Model of Public Health Insurance and Healthcare Expense
with Zhi Cao, Junjian Yi, Hang Zou, and Shaoyang Zhao
- Revise & Resubmit, International Economic Review.
Abstract: We develop and estimate a general equilibrium model to investigate the equilibrium effect of public health insurance expansion on healthcare expense, leveraging a policy change in China. Using model estimates, we simulate and decompose the policy effect on healthcare expense. We find that this insurance expansion substantially raises expense, with 59% of the increase driven by demand-side responses and 41% by supply-side responses. Welfare analyses suggest that this policy tends to be less cost-effective than comparable policies studied in the literature. Through counterfactual policy analyses, we explore alternative insurance plan designs that improve individual welfare without increasing government spending.
Vital Links, Divided Gains: How China’s Transportation Boom Impacted Healthcare
with Jing Li, Lin Ma, and Junjian Yi
Abstract: We study the impact of transportation infrastructure on healthcare access and health outcomes. Using administrative data on over 600,000 hospitalizations for cardiovascular and cerebrovascular diseases (CCVD) in Sichuan, China, we show that patients travel from low-medical-resource to high-medical-resource cities, but travel time imposes substantial barriers, especially for low-income patients. We develop and structurally estimate a dynamic spatial model in which individuals choose treatment locations by weighing the expected effectiveness of care against travel and financial costs. Counterfactual simulations indicate that, holding medical resources fixed at the 2010 level, improvements in the national transport network between 2010 and 2018 would reduce CCVD mortality by approximately 10,000 cases per year. While geographic disparities in health outcomes narrowed, gains accrued disproportionately to high-income patients.
Welfare Analysis of Hospital Contest in Market Equilibrium
with Zhi Cao, Junjian Yi, Hang Zou, and Shaoyang Zhao