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NBER Reporter NATIONAL BUREAU OF ECONOMIC RESEARCH A quarterly summary of NBER research No. 4, December 2019 Program Report ALSO IN THIS ISSUE Elasticity of Net Entry to Tobin’s q Across Industries Health Care 1.5% 1.2 0.9 Jonathan Gruber* 0.6 0.3 0.0 -0.3 The rise of the US health-care sector over the past several decades has been remarkable. As Figure 1 [page 3, top] shows, in 1970, the country -0.6 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 devoted slightly more than 6 percent of GDP to health care, about 1 per- Source: Researchers’ calculations using data from Compustat cent more than other nations. Today, the nation devotes almost 18 percent of GDP to health care, which is larger than spending on cars, clothing, food, furniture, housing, fuel, and recreation combined — and is a full 8 The Economics and Politics percent above the average in comparable countries. of Market Concentration 10 Health outcomes haven’t kept up, as shown in Figure 2 [page 2, bot- Interbank Network Risk, tom left]. US life expectancy was slightly below the average of comparable Regulation, and Financial Crises 13 countries in 1980. Today it has fallen far below that of these other coun- Economics and Behavioral Health 16 tries, with life expectancy actually declining for the first time in decades. These striking facts have motivated a sharp increase in the quality and Household Expectations: quantity of work in the NBER Health Care Program. From a handful of From Neuroscience to Household working papers in 1992, this program has grown to produce an average Finance and Macroeconomics 20 of more than 100 working papers a year in the last three full years. These NBER News 23 papers reflect the larger interest of the economics profession in health Conferences 26 issues. In 1990, the American Economic Review published just two articles about health; now it publishes about five a year. In theAmerican Economic Program and Working Group Meetings 31 Journals in Economic Policy and Applied Economics, major new general- NBER Books 46 interest journals that cover health topics, about one in eight articles pub- lished in 2017 focused on health. The Health Care Program has expanded and drawn in a new generation of health economists. In this review, I cover developments in the NBER Health Care Program over the last seven years. This has been a period both of substantial upheaval in the health-care sector and of rapid growth of studies of that sec- *Jonathan Gruber is the Ford Professor of Economics at MIT. He is an NBER research associate and has been director of the bureau’s Health Care Program for the past decade. Gruber was an architect of health care reform efforts in Massachusetts and consulted with the Obama Administration on creation of the Affordable Care Act. Reporter Online at: www.nber.org/reporter tor, with 674 working papers posted in the Physician Behavior program since 2012. These studies have cov- Health Expenditures as a Percent of GDP, 1970–2017 ered a broad array of topics, and it is impos- A common refrain in health economics is that the most expen- NBER Reporter 20% sible to do them justice in this short review. sive piece of medical technology is the physician’s pen, yet there is Instead, I will highlight a few key areas of 17.1% relatively little understanding of the physician behaviors that drive study by NBER researchers, with apologies 15 medical spending. A set of recent papers has made enormous prog- The National Bureau of Economic Research is a private, nonprofit research orga- United States nization founded in 1920 and devoted to objective quantitative analysis of the to the large number of authors of studies ress in helping us understand physician decision-making and its American economy. Its officers and board of directors are: that I am excluding. implications for the health-care system. President and Chief Executive Officer — James M. Poterba 10 10.5% One of the enduring mysteries in health care is the enormous Controller — Kelly Horak The Affordable Care Act variation among physicians in treatment styles. These differences Corporate Secretary — Alterra Milone emerge in physician training.11 David Cutler, Jonathan Skinner, 6.2% 5 Comparable country average BOARD OF DIRECTORS The ACA is the most significant gov- 4.9% Ariel Dora Stern, and David Wennberg use surveys of physi- Chair — Karen N. Horn ernment intervention in the US health-care cians to show that much of the variation reflects physician beliefs Vice Chair — John Lipsky system since the introduction of Medicare unsupported by clinical evidence.12 There is mixed evidence on Treasurer — Robert Mednick and Medicaid. Moreover, it was introduced 0 the welfare implications of physician treatment variation. Gautam DIRECTORS AT LARGE both in a data-rich environment in which 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Gowrisankaran, Keith Joiner, and Pierre-Thomas Léger find that Peter Aldrich Jacob A. Frenkel Michael H. Moskow many datasets can be used to analyze its physicians randomly assigned to different emergency department Elizabeth E. Bailey Robert S. Hamada Alicia H. Munnell Health expenditures do not include investments in structures, equipment, or research. The set of comparable countries Susan M. Collins Peter Blair Henry Robert T. Parry impacts, and in a manner that generated includes Australia, Austria, Belgium, Canada, France, Germany, Japan, Netherlands, Switzerland, and the United Kingdom doctors who are more skilled see higher resource use, but not nec- Kathleen B. Cooper Karen N. Horn Douglas Peterson quasi-experimental variation that can be Source: Kaiser Family Foundation analysis of OECD and National Health Expenditure data essarily better outcomes.13 In contrast, Janet Currie, W. Bentley Charles H. Dallara Lisa Jordan James M. Poterba used to convincingly estimate those impacts. MacLeod, and Jessica Van Parys find that for heart attack patients, George C. Eads John Lipsky John S. Reed Jessica P. Einhorn Laurence H. Meyer Mark Weinberger In particular, the enormous expansion of Figure 1 there is large variation in treatment intensity across providers, and Mohamed El-Erian Karen Mills Martin B. Zimmerman the Medicaid program to all those whose income is less show that the ACA clearly has expanded coverage [Figure 3] those who treat more intensively deliver better outcomes.14 Diana Farrell than 133 percent of the poverty line, which occurred through provisions such as extending coverage of dependents up to A related question is whether more information provided only in a subset of states and over time in those states, age 26,2,3 expanding Medicaid,4 and subsidizing premiums in the to patients can improve outcomes and performance. Jonathan DIRECTORS BY UNIVERSITY APPOINTMENT provides a natural case study for understanding the new exchange.5 Notable is the finding of that last paper that much Kolstad finds that when “report cards” were introduced on sur- Timothy Bresnahan, Stanford Samuel Kortum, Yale Pierre-André Chiappori, Columbia George Mailath, Pennsylvania impact of expanded insurance coverage. This has pro- of the increase in Medicaid enrollment was not from those who geon outcomes in Pennsylvania, surgeons responded strongly to Alan V. Deardorff, Michigan Marjorie B. McElroy, Duke vided a wonderful environment for economic research. were newly eligible, but from those previously eligible who had poor performance relative to their peers, suggesting a strong role Edward Foster, Minnesota Joel Mokyr, Northwestern Health Care Program affiliates’ research on the now enrolled in the program. for “intrinsic motivation.”15 At the same time, Erin Johnson and John P. Gould, Chicago Cecilia Elena Rouse, Princeton 16 Mark Grinblatt, , Richard L. Schmalensee, ACA has covered a wide variety of areas, but has There has also been a clear increase in health-care utiliza- M. Marit Rehavi, and in another study, Michael Frakes, Anupam California Los Angeles MIT 6 Bruce Hansen, Wisconsin-Madison Ing o Wa l t er, New York focused primarily on the impacts of the ACA on insur- tion in response to broadened insurance coverage. Early studies Jena, and I find that when physicians are themselves patients, they Benjamin Hermalin, California, Berkeley David B. Yoffie, Harvard ance coverage, health-care utilization, and health, as have generally found positive impacts of the ACA on population receive a quality of care similar to that of comparable non-physi- 1 17 DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS reviewed by Benjamin Sommers and me. Studies health, but more work is needed to assess the long-term impacts on cian patients. 7 Jean-Paul Chavas, Agricultural and Applied Economics Association health. Martin Gruber, American Finance Association A particularly nota- Philip Hoffman, Economic History Association Average Life Expectancy at Birth, 1980–2017 ble area of research on the Percentage of Non-Elderly without Health Insurance Arthur Kennickell, American Statistical Association Jack Kleinhenz, National Association for Business Economics ACA has been focused on 86 years 20% Robert Mednick, American Institute of Certified Public Accountants US Germany UK Canada France Spain Japan the impact of the law’s pro- National Health Interview Survey data Peter L. Rousseau, American Economic Association visions on labor market 18 Gregor W. Smith, Canadian Economics Association 84 William Spriggs, American Federation of Labor and behavior, with mixed results. 16 Congress of Industrial Organizations 82 Research on a large restric- 14 Bart van Ark, The Conference Board tion on health insurance cov- Current Population Survey data Gallup data 12 The NBER depends on funding from individuals, corporations, and private 80 erage in Tennessee before the foundations to maintain its independence and its flexibility in choosing its ACA showed an associated 10 research activities. Inquiries concerning contributions may be addressed to James 78 significant rise in labor force 8 M.