(Job Market Paper; Latest Version, Dec. 2018)
Abstract: I provide new evidence that health insurance can discourage investment in health. I find that, in the United States before 2006, 13-30% of female diabetics who used insulin to manage their condition stopped using insulin once they turned 65 and became eligible for health insurance via Medicare. I reconcile these results with those from other studies by developing a model of the trade-off between prevention and treatment. The model explains the large effect sizes in this paper via two mechanisms. First, individuals substitute prevention efforts away from periods when the price of treatment is low and toward periods when the price of treatment is high. Second, this effect is stronger for preventive measures that have larger effects on health. The model also shows that the long-term crowding out of prevention is at least as large as the shift in the timing of prevention estimated in this paper. The introduction of more generous subsidies for insulin under Medicare Part D in 2006 eliminated this effect, saving up to $487 million per annum in forgone health care costs.
"Coherence Leads to Caution: Subjective Medical Expenses Forecasts, The Conjunction Fallacy, and Over-Pessimism"
Abstract: Towards the end of the life cycle, the risk that one may need expensive medical treatment is one of the most important motives for saving. The accuracy of individuals' forecasts regarding this risk is therefore of first-order importance for their saving behaviour as well as their welfare. Nonetheless, 10.3% of individuals in the Health and Retirement Study (HRS) make forecasts for their out-of-pocket medical expenditures that imply decreasing cumulative distribution functions - a violation of the laws of probability. I go on to test whether the remaining individuals' coherent forecasts of their out-of-pocket medical expenses follow Bayes' Rule. I find that individuals who make coherent forecasts are more pessimistic than hypothetical Bayesian agents.
Work in Progress
"Going Off-Script: Physician Licence Suspension and the Demand for Medications" (with Emma Boswell Dean and Mallick Hossain)
"Shelter from the Storm? The Effect of Housing Wealth Shocks on the Joint Demand for Prevention and Insurance" (with Gregory S. Burge)