Essays in Applied Microeconomics

Abstract

Essays on the effects of health policy payment systems in long-term care and end-of-life care institutions are studied. In the arena of long-term care, state Medicaid agencies have recently implemented pay-for-performance (P4P) programs to address poor quality of care in nursing homes. Using facility-quarter level data from 2003 to 2010, we evaluate the effects of Medicaid nursing home P4P programs on clinical quality measures, relying on variation in the timing of P4P implementation across states. Further, we exploit variation in the structure of states' programs to investigate whether programs that reward certain dimensions of quality are associated with larger improvements. We find P4P decreases the incidence of adverse clinical outcomes by as much as 8%, and the improvements are concentrated among the measures that experienced an increase in their relative returns and share strong commonalities in production. In the Hospice industry, changes to the current reimbursement system are mandated by the Patient Protection and Affordable Care Act. The motivation stems from noticeable hospice utilization changes since the Medicare Hospice Benefit (MHB) introduced a per-diem reimbursement in 1983. This research analyzes the abilities of a multi-tiered payment system, and a simpler two-part pricing system, to accurately match Medicare payments with hospice patient costs. Both systems improve on the current payment mechanism, while two-part pricing is the only system to maintain access to care for all MHB eligible patients. In addition, consumer disutility incurred by driving to airports is estimated and used to define air travel markets. Though an accurate definition of an economic market is important for any study of industry, there is no rule governing what exactly constitutes a market. To define a market we must ask the question ``between which products do consumers substitute,'' knowing that the answer to this question will depend on how ``close'' products are to one another in product space, as well as how close they are to one another, and to consumers, in geographic space. We estimate a discrete choice model of air travel demand that uses known information about the locations of products and consumers, which allows us to study substitution patterns among air travel products at different airports. We evaluate the commonly used city-pair and airport-pair definitions of a market for air travel, and conclude that a city-pair is the appropriate definition. We also employ the Hypothetical Monopolist test for antitrust market definition, as defined by the Department of Justice and Federal Trade Commission, and conclude that the relevant geographic market for antitrust analysis is frequently more narrowly defined as an airport-pair.