Unbiased Analysis of Today's Healthcare Issues

Amy Finkelstein in BusinessWeek

Written By: Jason Shafrin - Aug• 08•06

Amy Finkelstein is one of my favorite healthcare economists and recently BusinessWeek ran an article (“So that’s why it’s so expensive“) profiling her and her work.  I have profiled Ms. Finkelstein before in my June 15th post describing her 2005 paper with McGarry.  She also has a new NBER working paper (“The aggregate effects of health insurance: Evidence from the introduction of Medicare“), which is very interesting.  Here’s the abstract:

This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is over six times larger than what the evidence from individual-level changes in health insurance would have predicted. This disproportionately larger effect may arise if market-wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles. I present some evidence of these types of effects. A back of the envelope calculation based on the estimated impact of Medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period.

Finkelstein (2006), “The Aggregate Effects of Health Insurance: Evidence from the introduction of Medicare,” NBER Working Paper #11619.  http://papers.nber.org/papers/w11619

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