A Consideration of the Potential Side Effects of Health Insurance Coverage

The Patient Protection and Affordable Care Act (ACA) is federal health care reform legislation that represents the most significant health insurance expansion since Medicare and Medicaid were created in 1965. In this dissertation, I focus on how health insurance expansion affects the supply side of health care markets as well as health expenditures. While health insurance expansion potentially increases the demand for care, it also creates uncertainty, thereby impacting health care utilization, delivery, and input decisions. In my first chapter, I examine whether changes in health insurance coverage rates impact state-level health care delivery efficiency. Health care providers may vary in the accuracy of their demand forecasts, which could lead to inefficient excess capacity. My analysis reveals an average state-level efficiency score of 61 percent, suggesting significant underutilized inputs. I also find that states with higher insurance coverage rates tend to be less efficient. In my second chapter, I develop a theoretical framework that explains how a health insurance mandate impacts hospital input levels. To empirically investigate the channels of the framework, I use a ten-year panel of data to compare Massachusetts hospitals with those in other surrounding states. The results suggest that the Massachusetts health insurance mandate significantly reduced the demand for emergency care but left overall demand unchanged. It also significantly increased capacity. The increase in capacity without a corresponding increase in overall demand suggests inefficiency. In my third chapter, I explore the relationship between state-level health insurance coverage rates and Medicaid expenditures. My empirical results suggest that state Medicaid expenditures are more responsive to private health care expenditures and population aging rather than health insurance coverage rates.