Public Health Insurance Expansions and Hospital Technology Adoption

51 Pages Posted: 26 May 2014

See all articles by Seth Freedman

Seth Freedman

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Haizhen Lin

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Kosali Ilayperuma Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); National Bureau of Economic Research (NBER)

Date Written: May 2014

Abstract

This paper explores the effects of public health insurance expansions on hospitals' decisions to adopt medical technology. Specifically, we test whether the expansion of Medicaid eligibility for pregnant women during the 1980s and 1990s affects hospitals' decisions to adopt neonatal intensive care units (NICUs). While the Medicaid expansion provided new insurance to a substantial number of pregnant women, prior literature also finds that some newly insured women would otherwise have been covered by more generously reimbursed private sources. This leads to a theoretically ambiguous net effect of Medicaid expansion on a hospital's incentive to invest in technology. Using American Hospital Association data, we find that on average, Medicaid expansion has no statistically significant effect on NICU adoption. However, we find that in geographic areas where more of the newly Medicaid-insured may have come from the privately insured population, Medicaid expansion slows NICU adoption. This holds true particularly when Medicaid payment rates are very low relative to private payment rates. This finding is consistent with prior evidence on reduced NICU adoption from increased managed-care penetration. We conclude by providing suggestive evidence on the health impacts of this deceleration of NICU diffusion, and by discussing the policy implications of our work for insurance expansions associated with the Affordable Care Act.

Suggested Citation

Freedman, Seth and Lin, Haizhen and Simon, Kosali Ilayperuma, Public Health Insurance Expansions and Hospital Technology Adoption (May 2014). NBER Working Paper No. w20159. Available at SSRN: https://ssrn.com/abstract=2441809

Seth Freedman (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Haizhen Lin

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

Kosali Ilayperuma Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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