Essays on Regulations in Health Care and Mergers

Abstract

This dissertation consists of three essays in public economics and industrial organization, focusing on the role of government regulation in health care and mergers in consumer-packaged goods. The first chapter studies the impact of deregulating low-cost entry in health care markets. Rising hospital costs in the U.S. have led states to deregulate entry of cheaper non-hospital providers, such as ambulatory surgery centers (ASCs). However, cost savings from entry deregulation may lead to increased moral hazard and decreased quality and convenience. I study deregulation in the context of Medicare and a reform to Missouri's Certificate of Need law, which relaxed entry restrictions on ASCs. Using a difference-in-differences strategy, I estimate the impact of deregulation, finding that the reform increased the number of ASCs in high-income urban areas by 58%. Typical ASC procedures, such as cataract surgeries and colonoscopies, shifted to ASCs, but overall utilization across all settings did not increase. Patients benefited somewhat from lower travel distances and faced similar complication rates despite seeing less experienced physicians. I then develop and estimate a structural model of procedure demand to recover consumer welfare. Counterfactual simulations indicate that changes to consumer welfare were small relative to the effects on reimbursement, suggesting that deregulation primarily redistributed rents from hospitals to physicians and Medicare. The second chapter, written jointly with Angie Acquatella and Myles Wagner, examines the role of health insurance for redistribution. We consider a social planner that cares about health in addition to income. Focusing on a restricted policy space that offers different health care subsidies for the rich and poor, we derive sufficient statistics for optimal policy, which depend on three objects: demand elasticities of medical spending by income, the joint distribution of health, income, and medical spending, and social preferences. We calibrate the joint distribution of health, income, and medical spending using the Medical Expenditure Panel Survey, and revisit the RAND Health Insurance experiment to recover demand elasticities by income. Then, we simulate the optimal joint health insurance policy and tax schedule using social welfare weights that approximate Utilitarian and Rawlsian welfare objectives over health and income. A Utilitarian planner chooses full insurance, and a Rawlsian planner chooses a public insurance policy that is much more generous than current Medicaid: full coverage for individuals below 300% of the Federal Poverty Line, and partial coinsurance for the rest. The final chapter, written jointly with Jeremy Majerovitz, explores the price and quantity effects of mergers in the consumer packaged goods market, which comprises approximately one-tenth of GDP in the United States. We match data on all recorded mergers between 2006 and 2017 with retail scanner data. Compared to prior work, which focuses on case studies of large mergers, our approach allows us to estimate the effect of a typical merger. Most mergers we study are highly asymmetric (a large firm acquires a much smaller firm) and rarely undergo regulatory review. By studying these mergers, we provide new evidence on the effects of mergers on prices, quantities, product availability, and exit. On average, mergers lead to a short-run price effect at the target of 1% and declines in total revenue of 7%. These average effects hide substantial heterogeneity across different groups of mergers. Our results highlight the importance of effects not captured in the canonical model, such as effects on consumer surplus through changes in product availability and through inefficient firms' capital being repurposed by more productive acquirors.