Do Employers Respond to Public Hospitals Crowding Out of Private Insurance? Eric Seiber Clemson University

Rationale 1.Repeated studies find public services crowding out private ins. coverage –Medicaid expansions –Public hospitals 2.Fewer workers eligible for ESI plans Question: Does hospital crowd out affect both Take-up and Supply of ESI?

Methodology Data: –1995 CPS: Contingent Workers Supplement –1995 AHA Annual Hospital Survey Choice Set 1.Offered ESI; (ESI, Pvt, No Insurance) 2.Not Offered ESI; (Pvt, No Insurance) –IIA Problem –Estimate with Nested Multinomial Logit Public Hospital Presence = % public beds

Methodology Prob(Ch ij = 1) = exp(β ij ’X t +  i ’Y t ) (i=1,2; j=1,2,3) Σ 2 m=1 Σ 3 n=1 exp(β mn ’X t +  m ’Y t ) where: X t = vector of characteristics determining both i and j Y t = vector of characteristics determining only I Y t necessary to resolve IIA Problem Two Models: 1.No income interactions 2.Pct Public Beds interacted with income levels

Results - Simulations Public hospitals had expected effect on Take-up Public bed change from 15% to 25% produced: Negligible effect for entire sample ESI decreases: 81.8% to 81.5% Uninsured increases: 16.0% to 16.6% Substantial effects for Poor and Near-Poor ESI decreases: 38.8% to 34.3% and 59.3% to 56.4% Uninsured increases: 58.3% to 63.3% and 37.5% to 40.5%

Results - Simulations Effect on ESI supply varies Public bed change from 15% to 25% produced: Negligible effect for entire sample ESI Offer decreases: 89.2% to 88.7% Change in ESI (0.3%) matched by reduction in Offer (0.5%) Not Offered, No Ins:9.6%, 10.2% Offered, No Ins:6.4%, 6.4% Substantial effects for Poor, smaller for Near-Poor ESI Offer decreases : 59.3% to 55.1% and 75.4% to 74.5% Change in ESI (4.5%) matched by reduction in Offer (4.2%) Not Offered, No Ins:38.8%, 43.0% Offered, No Ins:14.9%, 17.0%

Conclusions & Implications The public hospital crowd-out effect varies by income level Crowd-out effects matched by reduction in eligibility –Sequencing of change is unknown Question: Will the market catch workers if a public hospital converts from public status? –Simulations produced symmetrical results