Essays in Health Economics

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Essays in Health Economics
Kim, Daeho (creator)
Chay, Kenneth (Director)
Aizer, Anna (Reader)
Knight, Brian (Reader)
Brown University. Economics (sponsor)
Copyright Date
This dissertation examines the effects of health care policy on access to health care and health outcomes, use of medical technology, and educational attainment. The first chapter, co-authored with Kenneth Chay and Shailender Swaminathan, examines the impact of Medicare’s introduction on hospital insurance, utilization, and mortality rates. The analysis applies an “age discontinuity” design to data both before and after Medicare’s introduction. We find that Medicare: i) increased hospital utilization and costs among the elderly, but at a lower rate than previously found; and ii) significantly increased life expectancy in the eligible population. We estimate that Medicare’s introduction had a cost-per-life year ratio below $200 (in 1982-84 dollars). In addition, we present evidence that the benefit-cost ratios of Medicare fell during the 1980s, partly due to changes in Medicare’s reimbursement formula. The second chapter examines the impact of Medicare payment reform on hospital costs. Medicare’s Prospective Payment System (PPS) reform in 1983 tied hospital payments to the national average cost of each medical technology with the expectation of reducing health care costs. I show that an unintended consequence of PPS was to generate financial incentives for hospitals to expand treatments that had average costs greater than marginal costs due to sizable fixed investments. In the context of cardiac treatments, coronary artery bypass graft (CABG) surgery has a greater average-to-marginal cost ratio than angioplasty. Exploiting the discontinuity in Medicare eligibility, I find a discontinuous change in CABG use at age-65 after the reform that implies an increase of 50 to 60 percent. Nearly all of the increase is driven by CABG use expanded to relatively healthier patients. I also present evidence that the increased CABG use was not cost effective. The third chapter explores the role of hospital desegregation on educational attainment. The racial integration of Southern hospitals during the mid- or late-1960s provided increased access to hospital care for Southern blacks who previously had limited access. Using a difference-in-difference-in-differences approach, I document that the black-white gap in educational attainment decreased significantly more in the South than in the North among cohorts born after hospital desegregation.
Health Care Policy
Prospective Payment System
Hospital Desegregation
Medical policy
Medical technology
Educational attainment
Thesis (Ph.D. -- Brown University (2012)
xi, 156 p.


Kim, Daeho, "Essays in Health Economics" (2012). Economics Theses and Dissertations. Brown Digital Repository. Brown University Library.