impact of economic incentives on health outcomes and the quality of health care

• Online Access: http://hdl.handle.net/2047/D20323950

My dissertation is comprised of three essays in applied microeconomics. The first two essays explore topic in the dialysis industry, and the third essay focuses on the ex ante moral hazard effect of health insurance on risky behaviors. The first paper analyzes the causal effect of market competition on quality of care of the dialysis industry. Because Medicare is the predominant payer in the market, the price of dialysis treatment is predetermined. In order to attract more patients, dialysis facilities need to provide better quality of care. The Dialysis Compare website provides a new methodology to evaluate the quality of care using star rating. The new method is much easier for patients to understand and compare across facilities. Also, competitors are defined by real travel time between two locations. If the travel time from one facility to a different facility is less than a specified value, then this facility is a competitor. The competition is measured by number of competitors. Within a specified travel time, if there is no other facility, then this facility is a monopolist. The results show that competition has a positive effect on the quality care for the dialysis industry. When separating the effects from the facilities within and outside the same chain, the number of facilities within the same chain has a positive effect on the quality of care too. The second paper (co-authored with Carlos Cassó Domínguez) estimates the presence of economics of density of dialysis industry. Over 70\% percentage of diaysis centers are associated with a big chain, such as DaVita and Fresenius. In this paper, we used translog form of production function to estimate the economics of density. In addition, we used demographic information, density of competitors and quality of competition as instruments to address the reverse causality. The results show that the higher the density that facilities are located of a chain, the lower the average cost of those facilities in this chain. However,the magnitude is very small. Reducing costs and gaining competitive advantage is not the main reason that those facilities are trying to cluster together. The third paper analyzes the ex ante moral hazard effect of health insurance on drinking, smoking, and body weight using a subsample of the Behavioral Risk Factor Surveillance System (BRFSS) data. The percentage of people who are covered by health insurances grows every year, as the federal or state governments facilitate people to be covered by health insurance. If the ex ante moral hazard effect is too strong, it will offset the benefit from the coverage of health insurance. There are endogenous problems that are caused by ex post moral hazard effect, adverse selection, and risk averse. To address the endogenous problems, an instrumental variable, percentage insured people by state is added to this analysis, along with several control variables. The evidence that supports the existence of an ex ante moral hazard effect in some certain conditions.