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Early Childhood Education by MOOC: Lessons From Sesame Street

June 9, 2015 Comments off

Early Childhood Education by MOOC: Lessons From Sesame Street (PDF)
Source: National Bureau of Economic Research

Sesame Street is one of the largest early childhood interventions ever to take place. It was introduced in 1969 as an educational, early childhood program with the explicit goal of preparing preschool age children for school entry. Millions of children watched a typical episode in its early years. Well-designed studies at its inception provided evidence that watching the show generated an immediate and sizeable increase in test scores. In this paper we investigate whether the first cohorts of preschool children exposed to Sesame Street experienced improved outcomes subsequently. We implement an instrumental variables strategy exploiting limitations in television technology generated by distance to a broadcast tower and UHF versus VHF transmission to distinguish counties by Sesame Street reception quality. We relate this geographic variation to outcomes in Census data including grade-for-age status in 1980, educational attainment in 1990, and labor market outcomes in 2000. The results indicate that Sesame Street accomplished its goal of improving school readiness; preschool-aged children in areas with better reception when it was introduced were more likely to advance through school as appropriate for their age. This effect is particularly pronounced for boys and non-Hispanic, black children, as well as children living in economically disadvantaged areas. The evidence regarding the impact on ultimate educational attainment and labor market outcomes is inconclusive.

The National Rise in Residential Segregation

June 8, 2015 Comments off

The National Rise in Residential Segregation (PDF)
Source: National Bureau of Economic Research

This paper introduces a new measure of residential segregation based on individual-level data. We exploit complete census manuscript files to derive a measure of segregation based upon the racial similarity of next-door neighbors. Our measure allows us to analyze segregation consistently and comprehensively for all areas in the United States and allows for a richer view of the variation in segregation across time and space. We show that the fineness of our measure reveals aspects of racial sorting that cannot be captured by traditional segregation indices. Our measure can distinguish between the effects of increasing racial homogeneity of a location and the tendency to segregate within a location given a particular racial composition. Analysis of neighbor-based segregation over time establishes several new facts about segregation. First, segregation doubled nationally from 1880 to 1940. Second, contrary to previous estimates, we find that urban areas in the South were the most segregated in the country and remained so over time. Third, the dramatic increase in segregation in the twentieth century was not driven by urbanization, black migratory patterns, or white flight to suburban areas, but rather resulted from a national increase in racial sorting at the household level. The likelihood that an African American household had a non-African American neighbor declined by more than 15 percentage points (more than a 25% decrease) through the mid-twentieth century. In all areas of the United States — North and South, urban and rural — racial segregation increased dramatically.

Upcoding: Evidence from Medicare on Squishy Risk Adjustment

June 5, 2015 Comments off

Upcoding: Evidence from Medicare on Squishy Risk Adjustment
Source: National Bureau of Economic Research

Diagnosis-based subsidies, also known as risk adjustment, are widely used in US health insurance markets to deal with problems of adverse selection and cream-skimming. The widespread use of these subsidies has generated broad policy, research, and popular interest in the idea of upcoding—the notion that diagnosed medical conditions may reflect behaviors of health plans and providers to game the payment system, rather than solely characteristics of patients. We introduce a model showing that coding differences across health plans have important consequences for public finances and consumer choices, whether or not such differences arise from gaming. We then develop and implement a novel strategy for identifying coding differences across insurers in equilibrium in the presence of selection. Empirically, we examine how coding intensity in Medicare differs between the traditional fee-for-service option, in which coding incentives are weak, and Medicare Advantage, in which insurers receive diagnosis-based subsidies. Our estimates imply that enrollees in private Medicare Advantage plans generate 6% to 16% higher diagnosis-based risk scores than the same enrollees would generate under fee-for-service Medicare. Consistent with a principal-agent problem faced by insurers attempting to induce their providers to upcode, we find that coding intensity increases with the level of vertical integration between insurers and the physicians with whom they contract. Absent a coding inflation correction, our findings imply excess public payments to Medicare Advantage plans of around $10 billion annually. This differential subsidy also distorts consumers’ choices toward private Medicare plans and away from fee-for-service Medicare.

The Efficiency of Slacking Off: Evidence from the Emergency Department

April 2, 2015 Comments off

The Efficiency of Slacking Off: Evidence from the Emergency Department (PDF)
Source: National Bureau of Economic Research (via Stanford)

Work schedules play an important role in time-sensitive production utilizing workers interchangeably. Studying emergency department physicians in shift work, I find two types of strategic behavior induced by schedules. First, on an extensive margin, physicians “slack off” by accepting fewer patients near end of shift (EOS). Second, on an intensive margin, physicians distort patient care, incurring higher costs as they spend less time on patients accepted near EOS. I demonstrate a tradeoff between these two strategic behaviors, by examining how they change with shift overlap. Accounting for both costs of physician time and patient care, I find that physicians slack off at approximately second-best optimal levels.

The Insurance Value of Medical Innovation

March 26, 2015 Comments off

The Insurance Value of Medical Innovation (PDF)
Source: National Bureau of Economic Research (via University of Chicago)

Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework that accounts for all these aspects of value and links them to the value of health insurance. We show that any innovation worth buying reduces overall risk, thereby generating positive insurance value on its own. We conduct two empirical exercises to assess the significance of our insights. First, we calculate that conventional methods underestimate the value of historical health gains by 30-80%. Second, we examine a large set of medical technologies and calculate that insurance value on average adds 100% to the conventional valuation of those treatments. Moreover, we find that the physical risk-reduction value of these technologies is ten times greater than the financial risk they pose and the corresponding value of health insurance that insures this financial risk. Our analysis also suggests standard methods disproportionately undervalue treatments for the most severe illnesses, where physical risk to consumers is most costly.

Patient Responses to Incentives in Consumer-directed Health Plans: Evidence from Pharmaceuticals

February 26, 2015 Comments off

Patient Responses to Incentives in Consumer-directed Health Plans: Evidence from Pharmaceuticals
Source: National Bureau of Economic Research

Prior studies suggest that consumer-directed health plans (CDHPs) -characterized by high deductibles and health care accounts- reduce health costs, but there is concern that enrollees indiscriminately reduce use of low-value services (e.g., unnecessary emergency department use) and high-value services (e.g., preventive care). We investigate how CDHP enrollees change use of pharmaceuticals for chronic diseases. We compare two large firms where nearly all employees were switched to CDHPs to firms with conventional health insurance plans. In the first firm’s CDHP, pharmaceuticals were subject to the deductible, while in the second firm pharmaceuticals were exempt. Employees in the first firm shifted the timing of drug purchases to periods with lower cost sharing and were more likely to use lower-cost drugs, but the largest effect of the CDHP was to reduce utilization. Employees in the second firm also reduced utilization, but did not shift the timing or use of low cost drugs.

Pricing in the Market for Anticancer Drugs

January 28, 2015 Comments off

Pricing in the Market for Anticancer Drugs
Source: National Bureau of Economic Research

Drugs like bevacizumab ($50,000 per treatment episode) and ipilimumab ($120,000 per episode) have fueled the perception that the launch prices of anticancer drugs are increasing over time. Using an original dataset of 58 anticancer drugs approved between 1995 and 2013, we find that launch prices, adjusted for inflation and drugs’ survival benefits, increased by 10%, or about $8,500, per year. Although physicians are not penalized for prescribing costly drugs, they may be reluctant to prescribe drugs with prices that exceed subjective standards of fairness. Manufacturers may set higher launch prices over time as standards evolve. Pricing trends may also reflect manufacturers’ response to expansions in the 340B Drug Pricing Program, which requires manufacturers to provide steep discounts to eligible providers.

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