Nber Working Paper Series Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform

We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection. Martin B. Hackmann Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 [email protected] Jonathan T. Kolstad The Wharton School University of Pennsylvania 306 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104 and NBER [email protected] Amanda E. Kowalski Department of Economics Yale University 37 Hillhouse Avenue Box 208264 New Haven, CT 06520 and NBER [email protected] Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts