are health insurance markets competitive to gauge the competitiveness of the group health insurance industry i investigate whether health insurers charge higher premiums ceteris paribus to more profitable firms such direct price discrimination is feasible only in imperfectly competitive settings using a proprietary national database of health plans offered by a sample of large multisite firms from 1998 2005 i find firms with positive profit shocks subsequently face higher premium growth even for the same health plans moreover within a given firm those sites located in concentrated insurance markets experience the greatest premium increases the findings suggest health care insurers are exercising market power in an increasing number of geographic markets

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

the cyclical behavior of prices abstract the procyclical behavior of prices has been a staple of business cycle lore since the work of the early nber business cycle researchers this paper reexamines that empirical fact the aggregate data do not support procyclical price movements as a stable feature of the business cycle the only episode where it is a robust feature of the data is the period between the two world wars particularly the period of the great depression

facilitating consumer learning in insurance markets what are the welfare effects we model a monopoly insurance market where consumers can learn their accident risks at a cost c we then ask what are the welfare effects of a policy that reduces c if c is sufficiently small c c marginally reducing c hurts the insurer and weakly benefits the consumer finally a reduction in c that is successful meaning that the consumer gathers information after the reduction but not before it can hurt both parties this article is protected by copyright all rights reserved

health insurance without single crossing why healthy people have high coverage standard insurance models predict that people with high risks have high insurance coverage it is empirically documented that people with high income have lower health risks and are better insured we show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity we analyse different market structures and show the following if insurers have market power the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome our results do not rely on differences in risk aversion between types

who benefits when the government pays more pass through in the medicare advantage program abstract governments contract with private firms to provide a wide range of services while a large body of previous work has estimated the effects of that contracting surprisingly little has investigated how those effects vary with the generosity of the contract in this paper we examine this issue in the medicare advantage ma program through which the federal government contracts with private insurers to coordinate and finance health care for 17 million medicare recipients to do this we exploit a substantial policy induced increase in ma reimbursement in metropolitan areas with a population of 250 000 or more relative to msas below this threshold our results demonstrate that the additional reimbursement leads more private firms to enter this market and to an increase in the share of medicare recipients enrolled in ma plans our findings also reveal that about one eighth of the additional reimbursement is passed through to consumers in the form of better coverage a somewhat larger share accrues to private insurers in the form of higher profits and we find suggestive evidence of a large impact on advertising expenditures our results have implications for a key feature of the affordable care act that will reduce reimbursement to ma plans by 156 billion from 2013 to 2022

an individual health plan exchange which employees would benefit and why on average us workers fortunate enough to be offered health insurance through their place of work are given a small number of choices 80 percent of firms accounting for 37 percent of workers offered only one plan in 2005 although there are merits of limited choice including lower administrative costs for sponsoring employers and better pooling of risk within a given employee population substantial consumer surplus is forgone by preventing employees from selecting plans that best suit their needs in dafny ho and varela 2010 we build a model to quantify this deadweight loss using data on plan offerings and enrollment for 800 large us firms in 139 geographic markets over the period 1998 2006 we estimate a model of consumer preferences for characteristics of health plans we use the parameters of that model to predict employee choices under different hypothetical scenarios of expanded choice assuming employers total outlays for health insurance remain constant and plans are made available to new enrollees at large group rates we quantify those gains for each employee group year we observe for example big box retailer s employees in houston in 2003 and conclude these gains are sizable compared to average premiums we estimate that employees would be willing to forgo ten to 40 percent or more of their employer subsidies for the right to apply those subsidies to the plan of their choosing with the exact magnitude depending on the demand specification as well as the definition of the expanded choice set an individual health plan exchange which employees would benefit and why

price dispersion in mortgage markets using transaction level data on canadian mortgage contracts we document an increase in the average discount negotiated off the posted price and in rate dispersion our aim is to identify the beneficiaries of discounting and to test whether dispersion is caused by price discrimination the standard explanation for dispersion in credit markets is risk based pricing our contracts are guaranteed by government backed insurance so risk cannot be the main factor we find that lenders set prices that reflect consumer bargaining leverage not just costs the presence of dispersion implies a lack of competition but our results show this to be consumer specific

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

the industrial organization of health care markets the u s health care sector is large and growing health care spending in 2011 amounted to 2 7 trillion and 18 percent of gdp approximately half of health care output is allocated via markets in this paper we analyze the industrial organization literature on health care markets focusing on the impact of competition on price quality and treatment decisions for health care providers and health insurers we conclude with a discussion of research opportunities for industrial organization economists including opportunities created by the u s patient protection and affordable care act

competition leverage how the demand side affects optimal risk adjustment we study optimal risk adjustment in imperfectly competitive health insurance markets when high risk consumers are less likely to switch insurer than low risk consumers insurers then have an incentive to select even if risk adjustment perfectly corrects for cost differences to achieve first best risk adjustment should overcompensate insurers for serving high risk agents second we identify a trade off between efficiency and consumer welfare reducing the difference in risk adjustment subsidies increases consumer welfare by leveraging competition from the elastic low risk market to the less elastic high risk market third mandatory pooling can increase consumer surplus further at the cost of efficiency

price discrimination and bargaining empirical evidence from medical devices many important issues in business to business markets involve price discrimination and negotiated prices situations where theoretical predictions are ambiguous this paper uses new panel data on buyer supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market while many phenomena that restrict price discrimination are suggested as ways to decrease hospital costs e g mergers group purchasing organizations and transparency i find that 1 non discriminatory pricing actually works against hospitals because competition is more intense under price discrimination and 2 results depend ultimately on a previously unexplored bargaining effect

wages profits and rent sharing the paper suggests a new test for rent sharing in the u s labor market using an unbalanced panel from the manufacturing sector it shows that a rise in a sector s profitability leads after some years to an increase in the long run level of wages in that sector the paper controls for workers characteristics for industry fixed effects and for unionism lester s range of wages is estimated for rent sharing reasons alone at approximately 24 per cent of the mean wage

mergers when prices are negotiated evidence from the hospital industry in recent years many hospitals have merged in part to gain bargaining leverage with managed care organizations mcos we investigate the price impact of hospital mergers by formulating and estimating an equilibrium bargaining model between hospital systems and managed care health insurers over prices for inpatient services we estimate the parameters of the model using claims and discharge data from northern virginia in 2006 inova health system proposed to acquire prince william hospital we nd that this merger would have raised prices signicantly and that the remedy of separate bargaining imposed by the ftc in a separate hospital case would have resulted in a larger price increase

imperfect competition in selection markets policies to correct market power and selection can be misguided when these forces coexist we build a model of symmetric imperfect competition in selection markets that parameterizes the degree of market power and selection we use graphical price theoretic reasoning to characterize the interaction between these forces using a calibrated model of health insurance we show that the risk adjustment commonly used to offset adverse selection can reduce coverage and social surplus conversely in a calibrated model of subprime auto lending realistic levels of competition can generate an oversupply of credit implying that greater market power is desirable

search frictions and market power in negotiated price markets we provide a framework for empirical analysis of negotiated price markets using mortgage market data and a search and negotiation model we characterize the welfare impact of search frictions and

the complementarity between risk adjustment and community rating distorting market outcomes to facilitate redistribution abstract we analyze optimal risk adjustment in competitive health insurance markets when insurers have better information on their customers risk profiles than the sponsor of health insurance in the optimal scheme the sponsor uses reinsurance to screen insurers with bad and good risks in order to lower premiums for enrollees with high expected healthcare costs we then explore the effects of adding a community rating requirement to complement this risk adjustment scheme with community rating insurers have incentives to distort contract generosities to cherry pick low cost consumers however the reduced generosity for low cost types makes screening through reinsurance easier allowing the sponsor to redistribute more when costs for reinsurance are low or the sponsor s bias towards high cost consumers is high community rating dominates risk rating

unhealthy insurance markets search frictions and the cost and quality of health insurance we analyze the effect of search frictions in the market for commercial health insurance frictions increase insurance premiums enough to transfer 13 2 percent of consumer surplus from fully insured employer groups to insurers approximately 34 4 billion in 1997 and increase insurance turnover by 64 percent for the average pol icy this rent transfer harms consumers and when combined with heightened turnover reduces incentives to invest in future health we also find that a publicly financed insurance option can improve the efficiency of private insurance markets by reducing search fric tion induced distortions in pricing and marketing efforts jel d83 g22 i18 in the united states health insurance for those under age 65 is typically provided through group plans purchased by employers from commercial insurers health insurance is a complex multi attribute service so employers looking to buy insur ance face a difficult shopping problem savvy purchasers must consider which of the many drugs their employees might use are in the insurer s formularies which local physicians are part of the insurer s provider network and what copays fees and deductibles apply to which pharmaceuticals providers and services comparison shopping is made even more difficult by the fact that many aspects of insurance involve commitments to provide services under hard to anticipate contingencies medical underwriting by insurers and the great profusion of insurance products raises administrative costs and increases the complexity of an employer group s

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

paying a premium on your premium consolidation in the us health insurance industry we examine whether and to what extent consolidation in the u s health insurance industry is leading to higher employer sponsored insurance premiums we make use of a proprietary panel dataset of employer sponsored healthplans enrolling over 10 million americans annually between 1998 and 2006 to explore the relationship between premium growth and changes in market concentration we exploit the differential impact of a large national merger of two insurance firms across local markets to estimate the causal effect of concentration on market level premiums we estimate real premiums increased by approximately 7 percentage points in a typical market due to the rise in concentration during our study period we also find evidence that consolidation facilitates the exercise of monopsonistic power vis a vis physicians whose absolute employment and relative earnings decline in its wake

pricing regulation and imperfect competition on the massachusetts health insurance exchange abstract we analyze insurance pricing regulation under imperfect competition on the massachusetts health insurance exchange differential markups lead to price variation apart from cost variation coarse insurer pricing strategies identify consumer demand younger consumers are twice as price sensitive as older consumers older consumers thus face higher markups over costs modified community rating links prices for consumers differing in both costs and preferences and changes the marginal consumer firms face stricter regulations transfer resources from low cost to high cost consumers reduce firm profits and increase overall consumer surplus

does contracting out increase the efficiency of government programs evidence from medicaid hmos state governments contract with health maintenance organizations hmos to coordinate medical care for nearly 20 million medicaid recipients identifying the causal effect of hmo enrollment on government spending and health care quality is difficult if as is often the case recipients have the option to enroll in a plan to estimate the average effect of hmo enrollment this paper exploits county level mandates introduced during the last several years in the state of california that required most medicaid recipients to enroll in a managed care plan the empirical results demonstrate that the resulting switch from fee for service to managed care was associated with a substantial increase in government spending but no corresponding improvement in infant health outcomes the findings cast doubt on the hypothesis that hmo contracting has reduced the strain on government budgets

the comovement between output and prices evidence from a dynamic conditional correlation garch model abstract estimation results based on a multivariate dynamic conditional correlation garch model reveal that the overall price level tended to move in the same direction as output in periods before world war ii but in the opposite direction after the war

perfect competition in markets with adverse selection this paper proposes a perfectly competitive model of a market with adverse selection prices are determined by zero profit conditions and the set of traded contracts is determined by free entry crucially for applications contract characteristics are endogenously determined consumers may have multiple dimensions of private information and an equilibrium always exists equilibrium corresponds to the limit of a differentiated products bertrand game we apply the model to establish theoretical results on the equilibrium effects of mandates mandates can increase efficiency but have unintended consequences with adverse selection an insurance mandate reduces the price of low coverage policies which necessarily has indirect effects such as increasing adverse selection on the intensive margin and causing some consumers to purchase less coverage

insurer provider networks in the medical care market i use data on the hospital networks offered by managed care health insurers to estimate the expected division of profits between insurers and providers i include a simple profit maximization framework and an additional effect hospitals that can secure demand without contracting with all insurers e g those most attractive to consumers and those that are capacity constrained may demand high prices that some insurers refuse to pay hospital mergers may also affect price bargaining i estimate that all three types of hospitals capture higher markups than other providers these results provide information on the hospital investment incentives generated by bargaining

prospects of pakistan china energy and economic corridor abstract china s seaborne foreign oil supply through the strait of malacca is facing challenges because of territorial disputes pirate attacks and geopolitics the pakistan china energy and economic corridor pceec offers the option of constructing an oil pipeline to bypass the strait of malacca this paper studied the prospects of the pceec in the context of the security of china s foreign oil supply chain we assessed all the existing and proposed oil supply routes from the middle east and africa to china s border in terms of supply timeframes costs energy consumption and ghg emissions we used weight based model to estimate the capex opex and per barrel levelized cost of a proposed oil pipeline in the pceec from economic time energy and environmental perspective our assessment suggested that the construction of an oil pipeline in the pceec would be compatible with the existing routes and offer the shortest time for transporting oil to china s border the pceec would offer numerous prospects for regional energy and economic connectivity for both countries and the region including social economic commercial and geopolitical benefits

the comovement between output and prices abstract in this paper i analyze the comovement of us prices and output in the postwar period i use a new set of statistics to characterize the comovement between variables the statistics capture important information about the dynamics in the system the estimation procedure does not require assumptions about the order of integration or the types of assumptions needed for var decompositions i find that the comovement between output and prices is positive in the short run and negative in the long run i show that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain these empirical results while sticky price models with only demand shocks cannot

the impact of a public option in the u s health insurance market we develop a game theoretical framework to examine the implications of the introduction of a nonprofit public option in the u s health insurance market in this model heterogeneous consumers have to choose between two competing insurance plans one plan is offered by a profit maximizing private insurer the other by social welfare maximizing public option in equilibrium the distinct objectives of the two insurers induce adverse selection in consumer choice the public option covers the less healthy consumers yielding the more profitable segment of market to the private insurer however our empirical results suggest that both insurers will capture significant parts of the health insurance market jel i11 l10 l21 l32

how does risk selection respond to risk adjustment new evidence from the medicare advantage program to combat adverse selection governments increasingly base payments to health plans and providers on enrollees scores from risk adjustment formulae in 2004 medicare began to risk adjust capitation payments to private medicare advantage ma plans to reduce selection driven overpayments but because the variance of medical costs increases with the predicted mean incentivizing enrollment of individuals with higher scores can increase the scope for enrolling overpriced individuals with costs significantly below the formula s prediction indeed after risk adjustment ma plans enrolled individuals with higher scores but lower costs conditional on their score we find no evidence that overpayments were on net reduced

insurer pricing and consumer welfare evidence from medigap this article examines the welfare impact of imperfect competition in the medicare supplement insurance medigap market two firms control nearly three fourths of the medigap market and premiums exceed claims by over 25 i find that a low price elasticity and consumers brand preferences lead firms to engage in substantial marketing and price above cost therefore the strategic behavior of insurers facing relatively inelastic demand is critical in explaining poor market performance i also find that insurers do not capture all of the rents in this market rents also accrue to actors who perform marketing functions including agents and brokers

the effect of medicare part d on pharmaceutical prices and utilization prescription drug expenditures represent the most rapidly growing component of health care spending increasing from 5 percent of health care spending in 1980 to more than 10 percent by 2005 centers for medicare and medicaid services cms 2007a further almost 60 percent of all prescriptions in the united states are filled for beneficiaries of medicare medicaid and other government programs rapid innovation in new pharmaceuticals has contributed substantially to quality of life and longevity in the us frank lichtenberg 1996 these facts combined indicate that government procurement schemes are critical both in determining government expenditure on pharmaceuticals and in stimulating innovation of new treatments in this paper we show that the institutions and mechanisms used by the government to pur chase prescription drugs can strongly affect market outcomes by institutions we have in mind large buyer groups structured incentives for patients to consume certain products and the devel opment and use of formularies a formulary is a mechanism that allows a buyer to identify a therapeutically similar treatment as a viable substitute for a patented treatment and to create price competition due to the ability to substitute away from the more expensive product when bargaining with the seller of a patented product the ability to shift demand to a substitute drug is a powerful negotiating tool our paper provides evidence for what we consider a surprising outcome in the case of the new prescription drug program for medicare enrollees moving consumers from cash paying status to membership in an insured group lowers optimal prices for branded prescription drugs below what they otherwise would be this is surprising because the standard effect of insurance is to create inelastic demand and therefore elicit higher prices from a seller with market power duggan and scott morton 2006 however the insurers that we study bundle insurance with a formulary and other mechanisms to create elastic demand an individual consumer typically does not know which drugs are acceptable therapeutic substitutes the consumer s physician typi cally has poor knowledge of prices especially negotiated prices and any one consumer is too small a share of demand to negotiate with a pharmaceutical company a prescription drug plan can potentially surmount all three hurdles our evidence leads us to conclude that the formulary and other mechanisms perform the spe cial role of allowing buyers to move market share among drugs with patent protection thereby raising cross price elasticities and lowering purchase prices or reducing price increases for branded drugs this result contrasts with the common intuition that an uninsured consumer

differentiation and competition in hmo markets this paper examines how differentiation among health maintenance organizations hmos affects local market competition most markets for hmos appear sufficiently unconcentrated however differences among hmos may make competition less intense than the number of competitors would suggest to investigate this possibility we distinguish hmos that serve only local markets from those that operate regional or national networks we analyze how hmos of one type affect the profitability of the other using an equilibrium model of entry and product choice while the two types of hmos have strong competitive effects within segments the competitive effect of differentiated firms is negligible

how do health insurer market concentration and bargaining power with hospitals affect health insurance premiums the us health insurance industry is highly concentrated and health insurance premiums are high and rising rapidly policymakers have focused on the possible link between the two leading to aca provisions to increase insurer competition however while market power may enable insurers to include higher profit margins in their premiums it may also result in stronger bargaining leverage with hospitals to negotiate lower payment rates to partially offset these higher premiums we empirically examine the relationship between employer sponsored fully insured health insurance premiums and the level of concentration in local insurer and hospital markets using the nationally representative 2006 2011 kff hret employer health benefits survey we exploit a unique feature of employer sponsored insurance in which self insured employers purchase only administrative services from managed care organizations to disentangle these different effects on insurer concentration by constructing one concentration measure representing fully insured plans transactions with employers and the other concentration measure representing insurers bargaining with hospitals as expected we find that premiums are indeed higher for plans sold in markets with higher levels of concentration relevant to insurer transactions with employers lower for plans in markets with higher levels of insurer concentration relevant to insurer bargaining with hospitals and higher for plans in markets with higher levels of hospital market concentration

screening and adverse selection in frictional markets we develop a tractable framework for analyzing adverse selection economies with imperfect competition in our environment uninformed buyers offer a general menu of screening contracts to privately informed sellers some sellers receive offers from multiple buyers while others receive offers from only one buyer as in burdett and judd 1983 this specification allows us to smoothly vary the degree of competition nesting monopsony and perfect competition a la rothschild and stiglitz 1976 as special cases we show that the unique symmetric mixed strategy equilibrium exhibits a strict rank preserving property in that different types of sellers have an identical ranking over the various menus offered in equilibrium these menus can be all separating all pooling or a mixture of both depending on the distribution of types and the degree of competition in the market this calls into question the practice of using the incidence of separating contracts as evidence of adverse selection without controlling for market structure we examine the relationship between exante welfare and the degree of competition and show that in some cases an interior level of frictions maximizes welfare while in other cases competition is unambiguously bad for welfare finally we study the effects of various policy interventions such as disclosure and non discrimination requirements and show that our model generates new and perhaps counter intuitive insights

adverse selection and an individual mandate when theory meets practice we develop a model of selection that incorporates a key element of recent health reforms an individual mandate using data from massachusetts we estimate the parameters of the model in the individual market for health insurance we find that premiums and average costs decreased significantly in response to the individual mandate we find an annual welfare gain of 4 1 per person or 51 1 million annually in massachusetts as a result of the reduction in adverse selection we also find smaller post reform markups