Politics and Health Care Spending in the United States

Researchers study the 2003 Medicare Modernization to understand the dynamics in politics that encourage increases in healthcare spending.

Reviewing payment increases to hospitals as a result of the 2003 Medical Monetization Act, researchers analyze the impacts of these payment increases on politicians themselves. They find that members of Congress who voted in favor of the act were more likely to represent districts that receive such payment increases, and were also more likely to receive large campaign contributions before and after the program was extended.

Abstract and Citation

Abstract

We uncover political dynamics that reward and reinforce increases in US health spending by studying the passage of the 2003 Medicare Modernization (MMA). We focus on a provision added to the MMA, which allowed hospitals to apply for temporary Medicare payment increases. Hospitals represented by members of Congress who voted ‘Yea’ to the MMA were more likely to receive payment increases. The payment increases raised local health spending and led to suggestive increases in health sector employment. Members of Congress representing hospitals that got a payment increase received large increases in campaign contributions before and after the program was extended.

Publication Link

https://www.nber.org/papers/w23748

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