We uncover substantial interregional trade in medical services and investigate whether regional increasing returns explain it. In Medicare data, one-fifth of production involves a doctor treating a patient from another region. Larger regions produce greater quantity, quality, and variety of medical services, which they "export" to patients from elsewhere, especially smaller regions. We show that these patterns reflect scale economies: greater demand enables larger regions to improve quality, so they attract patients from elsewhere. Despite concerns about rural access, larger regions have higher marginal returns to spending. We study counterfactual policies that would lower travel costs rather than relocating production.

Media: Washington Post

Top income inequality in the United States has increased considerably within occupations. This phenomenon has led to a search for a common explanation. We instead develop a theory where increases in income inequality originating within a few occupations can "spill over" through consumption into others. We show theoretically that such spillovers occur when an occupation provides non-divisible services to consumers, with physicians our prime example. Examining local income inequality across U.S. regions, the data suggest that such spillovers exist for physicians, dentists, and real estate agents. Estimated spillovers for other occupations are consistent with the predictions of our theory.

Is government guiding the invisible hand at the top of the labor market? We use new administrative data to measure physicians' earnings and estimate the influence of healthcare policies on these earnings, physicians' labor supply, and allocation of talent. Combining the administrative registry of U.S. physicians with tax data, Medicare billing records, and survey responses, we find that physicians' annual earnings average $350,000 and comprise 8.6% of national healthcare spending. The age-earnings profile is steep; business income comprises one-quarter of earnings and is systematically underreported in survey data. There are major differences in earnings across specialties, regions, and firm sizes, with an unusual geographic pattern compared with other workers. We show that health policy has a major impact on the margin: 25% of physician fee revenue driven by Medicare reimbursements accrues to physicians personally. Physicians earn 6% of public money spent on insurance expansions. We find that these policies in turn affect the type and quantity of medical care physicians supply in the short run; retirement timing in the medium run; and earnings affect specialty choice in the long run.

Media: Washington Post (overall); Washington Post (regions); Stat; Forbes; Becker's Hospital Review

Who bears the consequences of administrative problems in healthcare? We use data on repeated interactions between a large sample of U.S. physicians and many different insurers to document the complexity of healthcare billing, and estimate its economic costs for doctors and consequences for patients. Observing the back-and-forth sequences of claim denials and resubmissions for past visits, we can estimate physicians' costs of haggling with insurers to collect payments. Combining these costs with the revenue never collected, we estimate that physicians lose 18% of Medicaid revenue to billing problems, compared with 4.7% for Medicare and 2.4% for commercial insurers. Identifying off of physician movers and practices that span state boundaries, we find that physicians respond to billing problems by refusing to accept Medicaid patients in states with more severe billing hurdles. These hurdles are quantitatively just as important as payment rates for explaining variation in physicians' willingness to treat Medicaid patients. We conclude that administrative frictions have first-order costs for doctors, patients, and equality of access to healthcare. We quantify the potential economic gains - in terms of reduced public spending or increased access to physicians - if these frictions could be reduced, and find them to be sizable.

We study how a market uses temporary workers to accommodate extraordinary demand shocks. When COVID-19 surges, hospitals need additional nurses---especially in specialties central to COVID-19 care. By comparing markets for COVID-relevant and other specialties, we show that the market for travel nurses expands dramatically and estimate travel nurse labor supply across space. Supply is quite elastic, as workers can choose to travel where they are needed. Workers travel longer distances to temporary jobs when payment increases, suggesting that an integrated national market facilitates reallocation when demand spikes. But when national cases peak, travel distance is less responsive to local demand.

The career risk associated with taking time away from wage employment may prevent individuals from pursuing entrepreneurship, or even from realizing that they would like to pursue it. We use a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date to ask whether having the ability to take time away from wage employment - while insulated from adverse career consequences - increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.9 percentage points. These entrepreneurs start incorporated businesses that hire employees - in industries where experimentation before entry has low costs and high benefits.

We demonstrate Medicare's influence on private insurers' payments for physicians' services. Using a large administrative change in payments for surgical versus medical care, we find that private prices follow Medicare's lead. A $1 change in Medicare's fees moved private prices by $1.16. A second set of Medicare payment changes, which generated area-specific reimbursement shocks, had a similar effect on private sector prices. Medicare's influence is strongest in areas with concentrated insurers, small physician groups, and competitive physician markets. The public sector's influences on system-wide resource allocation and costs extend well beyond the share of health expenditures it finances directly.

We investigate whether physicians' financial incentives influence health care supply, technology diffusion, and resulting patient outcomes. In 1997, Medicare consolidated the geographic regions across which it adjusts payments for physician services, generating area-specific price shocks that are plausibly exogenous with respect to health care demand. Areas with higher payment shocks experience significant increases in health care supply. On average, a 2 percent increase in payment rates leads to a 5 percent increase in care provision per patient. Elective procedures such as cataract surgery respond twice as strongly as less discretionary services like dialysis. Higher reimbursements also increase the pace of technology diffusion, as non-radiologists acquire magnetic resonance imaging scanners more readily when prices increase. The magnitudes of our empirical findings imply that changing provider incentives explain up to one third of recent growth in spending on physician services. The incremental care has no significant impacts on mortality, hospitalizations, or heart attacks.

There are persistent differences in self-reported subjective well-being across U.S. metropolitan areas, and residents of declining cities appear less happy than other Americans. Newer residents of these cities appear to be as unhappy as longer term residents, and yet some people continue to move to these areas. While the historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. One interpretation of these facts is that individuals do not aim to maximize self-reported well-being, or happiness, as measured in surveys, and they willingly endure less happiness in exchange for higher incomes or lower housing costs. In this view, subjective well-being is better viewed as one of many arguments of the utility function, rather than the utility function itself, and individuals make trade-offs among competing objectives, including but not limited to happiness.

Empirical research on cities starts with a spatial equilibrium condition: workers and firms are assumed to be indifferent across space. This condition implies that research on cities is different from research on countries, and that work on places within countries needs to consider population, income and housing prices simultaneously. Housing supply elasticity will determine whether urban success shows up in more people or higher incomes. Urban economists generally accept the existence of agglomeration economies, which exist when productivity rises with density, but estimating the magnitude of those economies is difficult. Some manufacturing firms cluster to reduce the costs of moving goods, but this force no longer appears to be important in driving urban success. Instead, modern cities are far more dependent on the role that density can play in speeding the flow of ideas. Finally, urban economics has some insights to offer related topics such as growth theory, national income accounts, public economics and housing prices.

Should the national government undertake policies aimed at strengthening the economies of particular localities or regions? Agglomeration economies and human capital spillovers suggest that such policies could enhance welfare. However, the mere existence of agglomeration externalities does not indicate which places should be subsidized. Without a better understanding of nonlinearities in these externalities, any government spatial policy is as likely to reduce as to increase welfare. Transportation spending has historically done much to make or break particular places, but current transportation spending subsidizes low-income, low-density places where agglomeration effects are likely to be weakest. Most large-scale place-oriented policies have had little discernable impact. Some targeted policies such as Empowerment Zones seem to have an effect but are expensive relative to their achievements. The greatest promise for a national place-based policy lies in impeding the tendency of highly productive areas to restrict their own growth through restrictions on land use.

One of private health insurers' main roles in the United States is to negotiate physician payment rates on their customers' behalf. Do private insurers' payment schedules differ meaningfully from that of Medicare, their public sector counterpart, or is the ostensibly prominent private sector a mirage? We investigate the frequency with which privately negotiated payments deviate from the public sector benchmark using two empirical approaches. The first exploits changes in Medicare's payment rates and the second exploits dramatic bunching in markups over Medicare rates. Although Medicare's rates are influential, we find that prices for 25 percent of physician services, representing 45 percent of spending, deviate from this benchmark. To understand private insurers' objectives, we examine heterogeneity in the pervasiveness and direction of deviations they make from the Medicare benchmark. We show that the Medicare-benchmarked share is high for services provided by small physician groups. It is low for capital-intensive care, for which Medicare's average-cost reimbursements deviate most from marginal cost. When relative prices deviate from Medicare's, they adjust towards the marginal costs of treatment. Our results suggest that providers and private insurers coordinate around Medicare's menu of relative payments for simplicity but–when the value at stake is sufficient–do indeed innovate.

This paper measures the costs and types of administrative inputs in health care. We use data on labor and nonlabor inputs by industry and categorize them as administrative or not. We find that nonlabor inputs are a critical part of administrative spending, over and above labor inputs. Trends in nonlabor administrative input spending have differed dramatically from that of labor input spending for hospitals over the last 20 years. Hospitals have substituted away from office workers and toward externally purchased inputs. The share of managers and technical workers in administration has grown. The technology of health care administration is changing.

The administrative costs of providing health insurance in the US are very high, but their determinants are poorly understood. We advance the nascent literature in this field by developing new measures of billing complexity for physician care across insurers and over time, and by estimating them using a large sample of detailed insurance "remittance data" for the period 2013–15. We found dramatic variation across different types of insurance. Fee-for-service Medicaid is the most challenging type of insurer to bill, with a claim denial rate that is 17.8 percentage points higher than that for fee-for-service Medicare. The denial rate for Medicaid managed care was 6 percentage points higher than that for fee-for-service Medicare, while the rate for private insurance appeared similar to that of Medicare Advantage. Based on conservative assumptions, we estimated that the health care sector deals with $11 billion in challenged revenue annually, but this number could be as high as $54 billion. These costs have significant implications for analyses of health insurance reforms.

Proposals to create a national health care plan such as "Medicare for All" rely heavily on reducing the prices that insurers pay for health care. These changes affect physicians' short-run incentives for care provision, and may also change health care providers' incentives to invest in capacity, thereby influencing the availability of care in the long term. We provide evidence on these responses using a major Medicare payment change combined with survey data on physicians' time use. We find evidence that physicians increase their time spent on capacity building when remuneration increases, and that they are subsequently more willing to accept new patients---especially those who may be the residual claimants on marginal capacity. These forces imply that short-run supply curves likely differ from the long-run supply curves. Policymakers need to account for how major changes to payment incentives would influence the investments that determine health system capacity.

Background: Excessive antibiotic use in cold and flu season is costly and contributes to antibiotic resistance. The study objective was to develop an index of excessive antibiotic use in cold and flu season and determine its correlation with other indicators of prescribing quality.

Methods and Findings: We included Medicare beneficiaries in the 40% random sample denominator file continuously enrolled in fee-for-service benefits for 2010 or 2011 (7,961,201 person-years) and extracted data on prescription fills for oral antibiotics that treat respiratory pathogens. We collapsed the data to the state level so they could be merged with monthly flu activity data from the Centers for Disease Control and Prevention. Linear regression, adjusted for state-specific mean antibiotic use and demographic characteristics, was used to estimate how antibiotic prescribing responded to state-specific flu activity. Flu-activity associated antibiotic use varied substantially across states—lowest in Vermont and Connecticut, highest in Mississippi and Florida. There was a robust positive correlation between flu-activity associated prescribing and use of medications that often cause adverse events in the elderly (0.755; P < 0.001), whereas there was a strong negative correlation with beta-blocker use after a myocardial infarction (−0.413; P=0.003).

Conclusions: Adjusted flu-activity associated antibiotic use was positively correlated with prescribing high-risk medications to the elderly and negatively correlated with beta-blocker use after myocardial infarction. These findings suggest that excessive antibiotic use reflects low-quality prescribing. They imply that practice and policy solutions should go beyond narrow, antibiotic specific, approaches to encourage evidence-based prescribing for the elderly Medicare population.

A steady downward trend in health-care services price inflation over the past decade has been a major factor holding down core inflation. Much of this downward trend reflects lower payments from public insurance programs. Looking ahead, current legislative guidelines imply considerable restraint on future public insurance payment growth. Therefore, overall health-care services price inflation is unlikely to rebound and appears likely to continue to be a drag on inflation.

Because the health sector makes up a large share of the U.S. economy, widespread price changes for medical services can impact overall inflation significantly. Cuts to public health-care spending spill over directly and indirectly to private spending. A recent estimate suggests the full effect of the Medicare payment cuts from the 2011 Budget Control Act resulted in a decline of 0.24 percentage point in the overall personal consumption expenditures price index. This is over twice the expected drop if private-sector spillovers are not included.

Between 1996 and 2006, real housing prices rose by 53 percent according to the Federal Housing Finance Agency price index. One explanation of this boom is that it was caused by easy credit in the form of low real interest rates, high loan-to-value levels and permissive mortgage approvals. We revisit the standard user cost model of housing prices and conclude that the predicted impact of interest rates on prices is much lower once the model is generalized to include mean-reverting interest rates, mobility, prepayment, elastic housing supply, and credit-constrained home buyers. The modest predicted impact of interest rates on prices is in line with empirical estimates, and it suggests that lower real rates can explain only one-fifth of the rise in prices from 1996 to 2006. We also find no convincing evidence that changes in approval rates or loan-to-value levels can explain the bulk of the changes in house prices, but definitive judgments on those mechanisms cannot be made without better corrections for the endogeneity of borrowers' decisions to apply for mortgages.

Popular discussions often treat the great housing boom of the 1996-2006 period as if it were a national phenomenon with similar impacts across locales, but across metropolitan areas, price growth was dramatically higher in warmer, less educated cities with less initial density and higher initial housing values. Within metropolitan areas, price growth was faster in neighborhoods closer to the city center. The centralization of price growth during the boom was particularly dramatic in those metropolitan areas where income is higher away from the city center. We consider four different explanations for why city centers grew more quickly when wealth was more suburbanized: (1) gentrification, which brings rapid price growth, is more common in areas with centralized poverty; (2) areas with centralized poverty had more employment concentration which led to faster centralized price growth; (3) areas with centralized poverty had the weakest supply response to the boom in prices in the city center; and (4) poverty is centralized in cities with assets, like public transit, at the city center that became more valuable over the boom. We find some support for several of these hypotheses, but taken together they explain less than half of the overall connection between centralized poverty and centralized price growth.

Objectives: This study was conducted to evaluate whether brain (B-type) natriuretic peptide (BNP) changes during sleep are associated with the frequency and severity of apneic/hypopneic episodes, intermittent arousals, and hypoxia. Background: Sleep apnea is strongly associated with heart failure (HF) and could conceivably worsen HF through increased sympathetic activity, hemodynamic stress, hypoxemia, and oxidative stress. If apneic activity does cause acute stress in HF, it should increase BNP. Methods: Sixty-four HF patients with New York Heart Association functional class II and III HF and ejection fraction < 40% underwent a baseline sleep study. Five patients with no sleep apnea and 12 with severe sleep apnea underwent repeat sleep studies, during which blood was collected every 20 min for the measurement of BNP. Patients with severe sleep apnea also underwent a third sleep study with frequent BNP measurements while they were administered oxygen. This provided 643 observations with which to relate apnea to BNP. The association of log BNP with each of 6 markers of apnea severity was evaluated with repeated measures regression models. Results: There was no relationship between BNP and the number of apneic/hypopneic episodes or the number of arousals. However, the burden of hypoxemia (the time spent with oxygen saturation < 90%) significantly predicted BNP concentrations; each 10% increase in duration of hypoxemia increased BNP by 9.6% (95% confidence interval: 1.5% to 17.7%, p = 0.02). Conclusions: Hypoxemia appears to be an important factor that underlies the impact of sleep abnormalities on hemodynamic stress in patients with HF. Prevention of hypoxia might be especially important for these patients.

Cities make it easier for humans to interact, and one of the main advantages of dense, urban areas is that they facilitate social interactions. This paper provides evidence for the US suggesting that the resurgence of big cities in the 1990s is due, in part, to the increased demand for these interactions and due to the reduction in big city crime, which had made it difficult for urban residents to enjoy these social amenities. However, while density is correlated with consumer amenities, we show that it is not correlated with social capital and that there is no evidence that sprawl has hurt civic engagement.