Healthy Assumptions
National Health Expenditure Projections, 2024–33: Despite Insurance Coverage Declines, Health To Grow As Share Of GDP
Sean Keehan et al.
Health Affairs, July 2025, Pages 776-787
Abstract:
National health expenditures are projected to have grown 8.2 percent in 2024 and to increase 7.1 percent in 2025, reflecting continued strong growth in the use of health care services and goods. During the period 2026–27, health spending growth is expected to average 5.6 percent, partly because of a decrease in the share of the population with health insurance (related to the expiration of temporarily enhanced Marketplace premium tax credits in the Inflation Reduction Act of 2022) and partly because of an anticipated slowdown in utilization growth from recent highs. Each year for the full 2024–33 projection period, national health care expenditure growth (averaging 5.8 percent) is expected to outpace that for the gross domestic product (GDP; averaging 4.3 percent) and to result in a health share of GDP that reaches 20.3 percent by 2033 (up from 17.6 percent in 2023).
Mergers and Quality Provision in Healthcare: Evidence from Nursing Homes
Pinka Chatterji, Chun-Yu Ho & Wenqing Li
NBER Working Paper, June 2025
Abstract:
This paper tests whether mergers between nursing home chains and independent facilities affect quality of care using facility-level data from 1999-2019. Staggered difference-in-differences estimates suggest that acquired facilities experience a 5% reduction in health deficiency citations 2 years post-merger. This improvement relies on the continuous supply of efficiency from chains; persists for four years; and is specific to mergers between chains and independent homes. Quality effects are driven by mergers involving smaller, higher-quality and non-private-equity-owned chains. A structural model suggests that the quality effect is generated by enhanced cost efficiency achieved by facilities serving larger numbers of residents after mergers.
Quality Disclosure and Regulation: Scoring Design in Medicare Advantage
Benjamin Vatter
Econometrica, May 2025, Pages 959-1001
Abstract:
Policymakers and market intermediaries often use quality scores to alleviate asymmetric information about product quality. Scores affect the demand for quality and, in equilibrium, its supply. Equilibrium effects break the rule whereby more information is always better, and the optimal design of scores must account for them. In the context of Medicare Advantage, I find that consumers' information is limited, and quality is inefficiently low. A simple design alleviates these issues and increases total welfare by 3.7 monthly premiums. More than half of the gains stem from scores' effect on quality rather than information. Scores can outperform full-information outcomes by regulating inefficient oligopolistic quality provision, and a binary certification of quality attains 98% of this welfare. Scores are informative even when coarse; firms' incentives are to produce quality at the scoring threshold, which consumers know. The primary design challenge of scores is to dictate thresholds and thus regulate quality.
Group Health Insurance Versus ACA Marketplaces: Selection, Subsidies, and Welfare
Sebastián Fleitas et al.
NBER Working Paper, June 2025
Abstract:
The Affordable Care Act (ACA) changed incentives for individual and employer-sponsored insurance. Using unique small group market (SGM) data with detailed claims and enrollment information, we analyze the welfare gains across households in the SGM from alternative formulations of ACA health insurance exchanges (HIXs). Accounting for observable heterogeneity increases estimated demand elasticities. Shutting down the SGM would reduce equilibrium adverse selection in HIX-type markets, increasing welfare for households moved to HIXs by $842 annually. The majority of households would obtain higher equilibrium welfare from HIXs, stemming from having more choices. Adding the 2014 ACA penalties only modestly decreases adverse selection.
The Impact of Deregulation on Long-Term Acute Care Hospitals: Evidence from Certificate-of-Need Repeals
Ali Melad & Markus Bjoerkheim
George Mason University Working Paper, January 2025
Abstract:
Demographic shifts are making healthcare access increasingly crucial for the elderly, but regulatory barriers, such as certificate-of-need (CON) laws, prevent the entry of new providers. This study examines the impact of the repeal of CON laws in 10 states on access to long-term acute care hospitals (LTACs). Using staggered difference-indifference estimators, we show that repealing CON laws causes an increase of 6.3 LTACs per million elderly, or approximately 69 percent, relative to the sample mean. In contrast to existing research, which finds that LTACs are primarily cost-increasing institutions, we find that the entry of LTACs into nursing home markets leads to reduced hospitalization rates and to reduced falls in skilled nursing facilities, indicating that LTACs serve an important role in long-term care markets.
Blockbusters, Sequels and the Nature of Innovation
Wesley Cohen et al.
NBER Working Paper, June 2025
Abstract:
Using detailed product- and invention-level data from the pharmaceutical industry, we demonstrate that firms with particularly high-selling “blockbuster” products concentrate their development efforts on new products that both target the same customer segments and are more likely to be technically similar to existing blockbuster products. This behavior, driven by an expectation of the stickiness of demand for existing product offerings, limits firms' incentives to invest in entirely new products targeting different customer segments. Our findings offer insights into how blockbuster products shape firms' customer segment and innovation choices, with implications for understanding the dynamics of technological change in R&D-intensive industries.
Where Discovery Happens: Research Institutions and Fundamental Knowledge in the Life-Sciences
Amitabh Chandra & Connie Xu
NBER Working Paper, July 2025
Abstract:
Fundamental knowledge in the life sciences has consequential implications for medicine and subsequent medical innovations. Using publications in leading life science journals to measure fundamental knowledge, we document large agglomerations in the institutions where it is discovered and a robust correlation between knowledge and subsequent citations in patents. We assess whether the institution where research is produced affects the output of scientists by using a scientist-mover design, which compares annual research output before and after a move for the same scientist. Between 50-60% of a scientist’s research output is attributable to the institution where they work, and two thirds of this effect is driven by the presence of star researchers. The magnitude of these effects has not decreased in more recent time periods, in the wake of technologies that make cross-institution collaborations easier, nor is it larger for moves to larger agglomerations, nor concentrated in particular scientific fields. We discuss the implications of these findings for research allocations in science and scientists’ leaving one institution for another.
The value of group purchasing: Evidence from the U.S. hospital industry
Haizhen Lin & Yanhao Wang
Journal of Public Economics, July 2025
Abstract:
Group purchasing organizations, or GPOs, are pervasive in many settings, but the actual value of GPOs remains a constant topic of debate. We offer one of the first studies examining the effect of GPOs on supply expenses in the U.S. hospital setting. Our two-way fixed effects model reveals that a one-standard-deviation increase in GPO scale (a GPO’s market share weighted by its member hospitals’ bed capacity) reduces an average hospital’s supply expenses by 2.7%, translating into a per-discharge savings of $48 and an annual savings of about $0.72 million. Our event study, which exploits a merger event between two of the largest GPOs, has produced qualitatively similar results. Meanwhile, we find no evidence that GPOs reduce supply expenses at the cost of the quality of care, nor by means of selective patient admission. Instead, we find that some of the cost savings are passed along to consumers in terms of lowered hospital prices, although only in highly competitive hospital markets. Our results contribute directly to policy debates over the value of GPOs and, more broadly, to the literature on countervailing buyer power and purchasing intermediaries.
Medical School Closures, Market Adjustment, and Mortality in the Flexner Report Era
Karen Clay et al.
NBER Working Paper, June 2025
Abstract:
Early twentieth century efforts to overhaul the quality of medical education in the United States (principally between 1905 and 1915 – the “Flexner Report Era”) led to a steep decline in the number of medical schools and medical school graduates. In this paper, we examine the consequences of these medical school closures be- tween 1900 and 1930 for county-level physicians, nurses, and midwives per capita as well as for infant, non-infant, and total mortality. To do so, we construct a school closure intensity measure for all counties in the United States, combining variation in (i) distance from closures, (ii) the historical number of graduates from closing schools, and (iii) the timing of closures. Nearby medical school closures (within 300 miles) led to a 4% reduction in physicians per capita, even after physician market adjustment through physician migration and postponed retirement. Strikingly, we find that medical school closures led infant mortality rates to decline by 8% and non- infant mortality rates to decline by 4%, suggesting that reducing the supply of poorly trained physicians may have reduced mortality.