Networks and Information in Healthcare Markets

Abstract

This dissertation consists of three chapters, each one being a self-contained research paper, studying the economics of networks and information in the markets for physicians and health insurance.

Chapters 1 and 2 consider the network of interactions between U.S. physicians through patient referrals. In Chapter 1 I document a tendency of physicians to refer more to other physicians of their same gender. As most referrals are still made by men, gender bias in referrals lowers demand for female specialists. Identifying and quantifying gender bias in light of possibly unobserved differences in labor supply, I estimate that homophily currently explains 14% of the current gender earnings gap among physicians. More broadly, these results suggest that homophily contributes to the persistence of occupational inequalities.

Chapter 2 studies peer effects in physician adoption of Electronic Health Records (EHR). Using data following a large EHR subsidy program, physicians are estimated to be almost twice as likely to adopt EHR once their peers with whom they have patients in common have adopted it. Indirect inference is used to overcome the survival bias that could arise, because adoption is only reported infrequently. Results suggest that by targeting influential individuals, policymakers could expedite technology adoption at an even faster rate.

Chapter 3, coauthored by Olivier Darmouni, studies horizon effects and adverse selection in health insurance markets. We show that short-term contracts, that are currently common in U.S. health insurance markets, exacerbate adverse selection. In community rated markets, longer contracts lead to an increase in coverage because demand and supply of insurance display horizon effects. Intuitively, over longer horizons the ability to predict risks diminishes, reducing adverse selection and leading to lower premiums for higher-coverage plans. Using risk data from U.S. health insurance claims we estimate that markets with two-year contracts will provide substantially more coverage, depending on how fast demand adjusts. However, welfare gains can be offset partially or fully by the increased exposure to risk of those individuals buying low-coverage plans.