Selection and Causal Effects in Voluntary Programs: Bundled Payments in Medicare

70 Pages Posted: 1 Aug 2022 Last revised: 17 Dec 2022

See all articles by Atul Gupta

Atul Gupta

University of Pennsylvania - Health Care Management

Joseph Martinez

University of Pennsylvania - The Wharton School

Amol S. Navathe

University of Pennsylvania - The Wharton School

Date Written: December 16, 2022

Abstract

Voluntary participation is a central feature of reforms being tested across US healthcare. Allowing choice can enhance effects if participants sort on unobserved treatment gains. However, selection may also bias program evaluation, misleading policymakers. We study this trade-off in the case of a national reform to reduce spending on surgeries. We exploit variation due to idiosyncratic program rules to instrument for participation. We detect considerable treatment effect heterogeneity but no evidence for sorting on treatment gains. In contrast, there is substantial selection on untreated outcomes in an unexpected direction, leading the difference in differences estimator to \textit{understate} the causal effect.

Keywords: voluntary reform, hospital payments

JEL Classification: I10,I18

Suggested Citation

Gupta, Atul and Martinez, Joseph and Navathe, Amol S., Selection and Causal Effects in Voluntary Programs: Bundled Payments in Medicare (December 16, 2022). Available at SSRN: https://ssrn.com/abstract=4160179 or http://dx.doi.org/10.2139/ssrn.4160179

Atul Gupta (Contact Author)

University of Pennsylvania - Health Care Management ( email )

204 Colonial Penn Center
3641 Locust Walk
Philadelphia, 19104-6218
United States

Joseph Martinez

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Amol S. Navathe

University of Pennsylvania - The Wharton School

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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