Medicare home health care is often characterized as a postacute care benefit, yet community-entry users-those admitted without a preceding hospitalization-account for nearly half of all spending and episodes in traditional Medicare. Using Medicare administrative data from 2017, 2019, and 2021, we analyzed differences between communityentry and postacute home health users. Community-entry beneficiaries were older; were more likely to be dually eligible; and had substantially higher rates of cognitive impairment, Alzheimer's disease, and depression compared with postacute users. Despite these clinical differences, visit patterns remained similar between groups. We documented significant state-level variation in community-entry prevalence, with changes in community-entry share that were positively associated with changes in overall home health spending. Our findings reveal a fundamental tension between policies that favor postacute care and the reality of Medicare home health use, which serves a substantial population with clinical and demographic profiles that differ from those of postacute care users.

Medicaid is one of the largest public programs in the United States—providing health insurance to over 75 million low-income Americans—and over three quarters of its enrollees receive care via private “managed care” insurers. In this article, we make three central points about the economics of contracting out Medicaid to private insurers. First, the empirical evidence on Medicaid privatization is mixed: contracting out has not meaningfully reduced public costs or improved quality of care. Second, we propose a framework, which we call “procured competition,” to describe the unique structure of Medicaid managed care as a hybrid of public procurement and regulated competition. Third, we discuss the key policy levers across procurement, competition, and consumer choice in this model. Throughout, we highlight open research questions, arguing that the enormous variation in how states design these programs—combined with limited evidence on what works—represents a promising area for high-impact scholarship.

The United States is in need of novel solutions to deliver mental health care, especially in the wake of inadequate community health financing following deinstitutionalization. The community mental health work model, in which lay providers deliver basic mental health care and refer to higher levels of care as needed, is proven internationally and has started to be implemented within the United States. Securing sustainable financing for the expansion of these programs remains a challenge. Here, we discuss three avenues for advancing the funding of United States based community mental health work programs. First, by implementing a volunteer model similar to that which has been done internationally; second, by bolstering pre-existing U.S. healthcare funding mechanisms; third, by pursuing a novel collaborative financing mechanism that is rooted in public good economics.

Are application hassles, or “ordeals,” an effective way to limit public program enrollment? We provide new evidence by studying (removal of) an auto-enrollment policy for health insurance, adding an extra step to enroll. This minor ordeal has a major impact, reducing enrollment by 33 percent and differentially excluding young, healthy, and economically disadvantaged people. Using a simple model, we show adverse selection—a classic feature of insurance markets—undermines ordeals’ standard rationale of excluding low-value individuals since they are also low-cost and may not be inefficient. Our analysis illustrates why ordeals targeting is unlikely to work well in selection markets. (JEL D82, G22, H75, I13, I18)

Adverse selection is a classic market failure known to limit or “unravel”' trade in high-quality insurance and many other economic settings. While the standard theory emphasizes quality distortions, we argue that selection has another big-picture implication: it unravels competition among differentiated firms, leading to fewer surviving competitors—and in the extreme, what we call “un-natural” monopoly. Adverse selection pushes firms toward aggressive price cutting to attract price-sensitive, low-risk consumers. This creates a wedge between average and marginal costs that (like fixed costs in standard models) limits how may firms can profitably survive. We demonstrate this insight in a simple model of insurer entry and price competition, estimated using administrative data from Massachusetts' health insurance exchange. We find a large “selection wedge” of 20-30% of average costs, which (without corrective policies) unravels the market to monopoly. Our analysis suggests a surprising policy implication: interventions that limit price-cutting can improve welfare by supporting more entry, and ultimately lower prices. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Health insurance premiums are primarily understood to pose financial barriers to coverage. However, the need to remit monthly premium payments may also create administrative burdens that negatively affect coverage, even in cases where affordability is a negligible concern. Using 2016-17 data from the Massachusetts health insurance Marketplace and a natural experiment, we evaluated how coverage retention was affected by the introduction of nominal (less than $10 for most enrollees) monthly premiums for plans that previously had $0 premiums. Compared with plans that maintained $0 premiums, those that took on nominal premiums saw enrollment fall by 14 percent over the following year. This attrition was attributable to terminations for nonpayment; most terminations occurred at the end of January, implying that a significant number of affected enrollees never initiated premium payments. These findings suggest that even very small premiums act as enrollment barriers, which may sometimes reflect administrative burdens more than financial hardship. Several policy approaches could mitigate adverse coverage outcomes related to nominal premiums.

Health plans for the poor increasingly limit access to specialty hospitals.We investigate the role of adverse selection in generating this equilibrium among private plans in Medicaid.Studying a network change, we find that covering a top cancer hospital causes severe adverse selection, increasing demand for a plan by 50% among enrollees with cancer versus no impact for others.Medicaid's fixed insurer payments make offsetting this selection, and the contract distortions it induces, challenging, requiring either infeasibly high payment rates or near-perfect risk adjustment.By contrast, a small explicit bonus for covering the hospital is sufficient to make coverage profitable.

This JAMA Forum discusses alternative ways to achieve universal coverage in the US such as administrative simplification in the Affordable Care Act plans to increase enrollment, having a basic policy that would be available to everyone, and options for supplemental coverage.

Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy). We present a new graphical theoretical framework that extends a workhorse model to incorporate both selection margins simultaneously. A key insight from our framework is that policies aimed at addressing one margin of selection often involve an economically meaningful trade-off on the other margin in terms of prices, enrollment, and welfare. Using data from Massachusetts, we illustrate these trade-offs in an empirical sufficient statistics approach that is tightly linked to the graphical framework we develop.

Health insurance markets face continued challenges with high premiums and limited insurer competition. We describe a unique set of "active purchasing" policies used by Massachusetts' pioneer health insurance exchange to shape the rules of competition and reward lower-price insurers with additional customers. We provide evidence that these policies significantly influenced insurer pricing. Between 2010 and 2013, over 80% of insurer prices were set exactly at or within 1% of pricing thresholds created by active purchasing policies. A key "limited choice" policy was associated with a 16%-20% reduction in average insurance prices relative to comparison markets in 2012-2014. Insurers achieved these price cuts partly through cost reductions via narrower provider networks and partly through reduced profit margins.

The United States spends substantially more on health care than most developed countries, yet leaves a greater share of the population uninsured.We suggest that incremental insurance expansions focused on addressing market failures will propagate inefficiencies and are not likely to facilitate active policy decisions that align with societal coverage goals.By instead defining a basic bundle of services that is publicly financed for all, while allowing individuals to purchase additional coverage, policymakers could both expand coverage and maintain incentives for innovation, fostering universal access to innovative care in an affordable system.

Health insurers increasingly compete on their networks of medical providers. Using data from Massachusetts’s insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: consumers loyal to star hospitals incur high spending, conditional on their medical state, because they use these hospitals’ expensive care. This implies heterogeneity in consumers’ incremental costs of gaining access to star hospitals, posing a challenge for standard selection policies. Along with selection on unobserved sickness, I find this creates strong incentives to exclude star hospitals, even with risk adjustment in place. (JEL D82, G22, H75, I11, I13, I18)

Policies that broaden eligibility for affordable coverage, though necessary, do little to address the administrative burdens involved in securing and maintaining coverage. Automatic insurance policies could remove barriers and make it easier for people to stay insured.

Incomplete health insurance enrollment is a persistent U.S. challenge despite large subsidies. We ask whether hassles built into enrollment systems matter for insurance take-up and targeting. Studying removal of an auto-enrollment policy, we find that a small hassle – a requirement to actively select a health plan to enroll – reduces take-up by 33%, a major impact equivalent to $470 (57%) higher enrollee premiums. Hassles differentially screen out younger, healthier, and poorer people – groups with both low value and costs of insurance. We show that this value-cost correlation – a standard feature of insurance, where risk drives both – may undermine the classic rationale for ordeals’ favorable targeting. JEL codes: I13, I18, D90

Importance Recent subsidy enhancements in Affordable Care Act (ACA) Marketplaces made many low-income enrolles (below 150% of the federal poverty level [FPL]) eligible for 2 free silver-tier plans. eligible for 2 free silver-tier plans. However, an unintended consequence of this structure is that the identity of which silver plans are free will often "turn over" between years, requiring that enrollees actively initiate premium payment (or lose coverage). The prevalence of this free-plan turnover is not known. Objective To measure the prevalence of free-plan turnover in ACA Marketplaces and to estimate how many enrollees below 150% of FPL are likely to be affected. Design, Setting, and Participants This observational cross-sectional study used data on plan offerings and premiums in 33 state ACA Marketplaces using HealthCare.gov in 2021 and 2022, along with estimates of county-level enrollee characteristics and plan selection patterns. The enrollment-weighted share of county markets affected by free-plan turnover was quantified, along with the association of turnover with enrollee and market characteristics. Estimates of the number of affected low-income enrollees were calculated using the data plus statistics reported in past research. Data were analyzed from November 21, 2021, to February 28, 2022. Results This study found that turnover of zero-premium plans was quite common, with 93% of HealthCare.gov counties (weighted by enrollment) experiencing at least 1 zero-premium plan in 2021 turning over to nonfree in 2022; 84% of counties experienced turnover of all $0 silver plans from 2021 to 2022. This turnover affected an estimated 1.36 million people with incomes below 150% of FPL. Turnover was more common in counties with a higher share of non-White enrollees, in Medicaid nonexpansion states, in counties with more carriers, and in counties with changes in the number of offered plans. Conclusions and Relevance The findings of this cross-sectional study suggest that owing to the prevalence of zero-premium plan turnover, many low-income ACA enrollees faced elevated risk of disenrollment at the start of 2022. Outreach to affected enrollees and other actions to encourage coverage retention and midyear reenrollment could help mitigate coverage losses.

Market-based health insurance programs rely on robust insurer participation to function well. We develop a model of a health insurance market with adverse selection where insurer participation is endogenous. We show that when low-cost consumers also tend to be highly price sensitive — the key feature of adverse selection — insurers often lose money at their profit-maximizing prices, even without fixed costs. Adverse selection (like fixed costs) generates strong incentives for insurers to undercut each other’s prices, leading to equilibria with few surviving competitors — and in the extreme, to natural monopoly. Using data from Massachusetts’ health insurance exchange, we leverage exogenous subsidy-driven variation in health plan prices to estimate high consumer price sensitivity and strong adverse selection. Using an estimated structural model, we find price sensitivity and adverse selection strong enough to lead to only monopoly or duopoly in equilibrium, absent corrective policies. We show how corrective policies, including price floors and risk adjustment, can restore equilibria with greater insurer participation and higher consumer welfare.

We provide a new method to analyze discrete choice models with state dependence and individual-by-product fixed effects and use it to analyze consumer choices in a policy-relevant environment (a subsidized health insurance exchange). Moment inequalities are used to infer state dependence from consumers’ switching choices in response to changes in product attributes. We infer much smaller switching costs on the health insurance exchange than is inferred from standard logit and/or random effects methods. A counterfactual policy evaluation illustrates that the policy implications of this difference can be substantive.

There is growing interest in market design using default rules and other “choice architecture” principles to steer consumers toward desirable outcomes. Using data from Massachusetts's health insurance exchange, we study an “automatic retention” policy intended to prevent coverage interruptions among low-income enrollees. Rather than disenroll people who lapse in paying premiums, the policy automatically switches them to an available free plan until they actively cancel or lose eligibility. We find that automatic retention has a sizable impact, switching 14 percent of consumers annually and differentially retaining healthy, low-cost individuals. The results illustrate the power of defaults to shape insurance coverage outcomes.

Under asymmetric information, adverse selection can lead to distortions in the level of insurance coverage purchased. This paper identifies an understudied dimension of sorting in insurance: sorting by plan design. In many markets, insurance plans have multi-dimensional cost-sharing attributes that can vary across plans with the same expected level of coverage. Classic theory suggests that plans with optimal risk protection have a straight-deductible design. I show that under asymmetric information, only high-risk individuals sort into such plans. Lower-risk individuals prefer plans that trade higher out-of-pocket limits for lower deductibles and coinsurance. Consistent with this theory, I find empirical evidence in the Affordable Care Act’s (ACA) Individual Exchange that (1) plans vary significantly in design and out-of-pocket risk within the same coverage tier, and (2) the straight-deductible plans attract enrollees with higher risk. I also consider the implications of sorting on plan design for efficiency and market regulation using simulations. I show that regulating away complex plan designs could have large negative effects in an otherwise unregulated competitive market. Further, in risk-adjusted markets such as the ACA exchanges, limiting complex plan designs will likely only have large benefits if consumer confusion plays an important role in choices.