Stuart Craig | Doctoral Student (PhD) in Health Care Management and Economics at Wharton, University of Pennsylvania (UPenn). Associate Fellow at LDI.

Job Market Paper

Competition in Employer Sponsored Health Insurance: Implications for a Public Option

156 million Americans obtain health insurance through an employer. High premiums and concerns about access have led to proposals to introduce a "public option," where the government would provide a public insurance plan to compete with private insurers. In the absence of an existing public option to study, I combine data on employer-insurer contracting and a structural model of supply and demand to predict market outcomes under various assumptions about the design such a policy. The model incorporates variation in employers' demand for health care, preferences over insurers, and the degree to which employers find it costly to switch between insurers. Insurers set employer-specific premiums allowing them to price discriminate. I find that insurers' ability to price discriminate substantially limits demand for the public option that cannot. More employers abandon the private market when the public option successfully replicates the quality of existing insurers and more aggressively regulates payments to health care providers. However, even a public option that obtains substantial market share does little to lower markups because employers who remain privately insured strongly prefer their private insurer, have large switching costs, and receive risk-rated premium offers that dominate the premiums of the public option.

Published and Accepted


How Important Is Price variation Between Health Insurers?
Accepted at Journal of Health Economics
with Keith Ericson, and Amanda Starc

Stuart V. Craig, Keith Marzilli Ericson, and Amanda Starc. "How Important is Price Variation Between Health Insurers." NBER Working Paper 25190.

Prices negotiated between payers and providers affect a health insurance contract’s value via enrollees’ cost-sharing and self-insured employers’ costs. However, price variation across payers is difficult to observe. We measure negotiated prices for hospital-payer pairs in Massachusetts and characterize price variation. Between-payer price variation is similar in magnitude to between-hospital price variation. Administrative-services-only contracts, in which insurers do not bear risk, have higher prices. We model negotiation incentives and show that contractual form and demand responsiveness to negotiated prices are important determinants of negotiated prices.

Mergers and Marginal Costs: New Evidence from Hospital Input Markets
Accepted at Rand Journal of Economics
with Matthew Grennan and Ashley Swanson

We estimate the effects of hospital mergers, using detailed data containing medical supply transactions (representing 23 percent of operating costs) from a sample of US hospitals 2009-2015. Pre-merger price variation across hospitals (Gini coefficient 7 percent) suggests significant opportunities for cost decreases. However, we observe limited evidence of actual savings. In this retrospective sample, targets realized 1.9 percent savings; acquirers realize no significant savings. Examining treatment effect heterogeneity to shed light on theories of "buyer power," we find that savings, when they occur, tend to be local, and potential benefits of savings may be offset by managerial costs of merging.

The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured
Quarterly Journal of Economics, 2019
with Zack Cooper, Martin Gaynor, and John Van Reenen

Cooper, Zack, Stuart V. Craig, Martin Gaynor, and John Van Reenen. "The price ain’t right? Hospital prices and health spending on the privately insured." The Quarterly Journal of Economics 134, no. 1 (2019): 51-107.

We use insurance claims data for 27.6 percent of individuals with private employer-sponsored insurance in the US between 2007 and 2011 to examine the variation in health spending and in hospitals’ transaction prices. We document the variation in hospital prices within and across geographic areas, examine how hospital prices influence the variation in health spending on the privately insured, and analyze the factors associated with hospital price variation. Four key findings emerge. First, health care spending per privately insured beneficiary varies by a factor of three across the 306 Hospital Referral Regions (HRRs) in the US. Moreover, the correlation between total spending per privately insured beneficiary and total spending per Medicare beneficiary across HRRs is only 0.14. Second, variation in providers’ transaction prices across HRRs is the primary driver of spending variation for the privately insured, whereas variation in the quantity of care provided across HRRs is the primary driver of Medicare spending variation. Consequently, extrapolating lessons on health spending from Medicare to the privately insured must be done with caution. Third, we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures. For example, hospital prices for lower-limb MRIs vary by a factor of twelve across the nation and, on average, two-fold within HRRs. Finally, hospital prices are positively associated with indicators of hospital market power. Even after conditioning on many demand and cost factors, hospital prices in monopoly markets are 15.3 percent higher than those in markets with four or more hospitals.

Health, Policy, Measurement

Impact of Medicaid Expansion on Women with Gynecologic Cancer: a Difference-in-Difference Analysis
American Journal of Obstetrics and Gynecology, 2020
with Benjamin B. Albright, Dimitrios Nasioudis, Haley A. Moss, Nawar A. Latif, Emily M. Ko, and Ashley F. Haggerty

[In Press]

Albright, Benjamin B., Dimitrios Nasioudis, Stuart Craig, Haley A. Moss, Nawar A. Latif, Emily M. Ko, and Ashley F. Haggerty. "Impact of Medicaid expansion on women with gynecologic cancer: a difference-in-difference analysis." American Journal of Obstetrics and Gynecology (2020).


Women with gynecologic cancer face socioeconomic disparities in care that affect survival outcomes. The Affordable Care Act offered states the option to expand Medicaid enrollment eligibility criteria as a means of improving timely and affordable access to care for the most vulnerable. The variable uptake of expansion by states created a natural experiment, allowing for quasi-experimental methods that offer more unbiased estimates of treatment effects from retrospective data than the traditional regression adjustment.


To use a quasi-experimental, difference-in-difference framework to create unbiased estimates of impact of Medicaid expansion on women with gynecologic cancer.

Study Design

We performed a quasi-experimental retrospective cohort study from the National Cancer Database files for women with invasive cancers of the uterus, ovary and fallopian tube, cervix, vagina, and vulva diagnosed from 2008 to 2016. Using a marker for state Medicaid expansion status, we created difference-in-difference models to assess the impact of Medicaid expansion on the outcomes of access to and timeliness of care. We excluded women aged <40 years owing to the suppression of the state Medicaid expansions status in the data and women aged ≥65 years owing to the universal Medicare coverage availability. Our primary outcome was the rate of uninsurance at diagnosis. Secondary outcomes included Medicaid coverage, early-stage diagnosis, treatment at an academic facility, and any treatment or surgery within 30 days of diagnosis. Models were run within multiple subgroups and on a propensity-matched cohort to assess the robustness of the treatment estimates. The assumption of parallel trends was assessed with event study time plots.


Our sample included 335,063 women. Among this cohort, 121,449 were from nonexpansion states and 213,614 were from expansion states, with 79,886 posttreatment cases diagnosed after the expansion took full effect in expansion states. The groups had minor differences in demographics, and we found occasional preperiod event study coefficients diverging from the mean, but the outcome trends were generally similar between the expansion and nonexpansion states in the preperiod, satisfying the necessary assumption for the difference-in-difference analysis. In a basic difference-in-difference model, the Medicaid expansion in January 2014 was associated with significant increases in insurance at diagnosis, treatment at an academic facility, and treatment within 30 days of diagnosis (P<.001 for all). In an adjusted model including all states and accounting for variable expansion implementation time, there was a significant treatment effect of Medicaid expansion on the reduction in uninsurance at diagnosis (−2.00%; 95% confidence interval, −2.3 to −1.7; P<.001), increases in early-stage diagnosis (0.80%; 95% confidence interval, 0.2–1.4; P=.02), treatment at an academic facility (0.83%; 95% confidence interval, 0.1–1.5; P=.02), treatment within 30 days (1.62%; 95% confidence interval, 1.0–2.3; P<.001), and surgery within 30 days (1.54%; 95% confidence interval, 0.8–2.3; P<.001). In particular, large gains were estimated for women living in low-income zip codes, Hispanic women, and women with cervical cancer. Estimates from the subgroup and propensity-matched cohorts were generally consistent for all outcomes besides early-stage diagnosis and treatment within 30 days.


Medicaid expansion was significantly associated with gains in the access and timeliness of treatment for nonelderly women with gynecologic cancer. The implementation of Medicaid expansion could greatly benefit women in nonexpansion states. Gynecologists and gynecologic oncologists should advocate for Medicaid expansion as a means of improving outcomes and reducing socioeconomic and racial disparities.

Variation In Health Spending Growth For the Privately Insured From 2007 to 2014
Health Affairs, 2019
with Zack Cooper, Charles Gray, Martin Gaynor, and John Van Reenen

Zack Cooper, Stuart V Craig, Charles Gray, Martin Gaynor, and John Van Reenen. “Variation In Health Spending For the Privately Insured From 2007 to 2014," Health Affairs, February 2019, 38(2): 230-236.

We examined the growth in health spending on people with employer-sponsored private insurance in the period 2007–14. Our analysis relied on information from the Health Care Cost Institute data set, which includes insurance claims from Aetna, Humana, and UnitedHealthcare. In the study period private health spending per enrollee grew 16.9 percent, while growth in Medicare spending per fee-for-service beneficiary decreased 1.2 percent. There was substantial variation in private spending growth rates across hospital referral regions (HRRs): Spending in HRRs in the tenth percentile of private spending growth grew at 0.22 percent per year, while HRRs in the ninetieth percentile experienced 3.45 percent growth per year. The correlation between the growth in HRR-level private health spending and growth in fee-for-service Medicare spending in the study period was only 0.211. The low correlation across HRRs suggests that different factors may be driving the growth in spending on the two populations.

Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007-2014
Health Affairs, 2019
with Zack Cooper, Martin Gaynor, Nir J. Harish, Harlan M. Krumholz, and John Van Reenen

Zack Cooper, Stuart V Craig, Martin Gaynor, Nir J. Harish, Harlan M. Krumholz, and John Van Reenen. "Hospital Prices Grew Substantiall Faster Than Physician Prices For Hospital-Based Care In 2007-2014," Health Affairs, February 2019, 38(2): 184-189.

Evidence suggests that growth in providers’ prices drives growth in health care spending on the privately insured. However, existing work has not systematically differentiated between the growth rate of hospital prices and that of physician prices. We analyzed growth in both types of prices for inpatient and hospital-based outpatient services using actual negotiated prices paid by insurers.We found that in the period 2007–14 hospital prices grew substantially faster than physician prices. For inpatient care, hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent, while physician prices grew 6 percent. A majority of the growth in payments for inpatient and hospital-based outpatient care was driven by growth in hospital prices, not physician prices. Our work suggests that efforts to reduce health care spending should be primarily focused on addressing growth in hospital rather than physician prices. Policy makers should consider a range of options to address hospital price growth, including antitrust enforcement, administered pricing, the use of reference pricing, and incentivizing referring physicians to make more cost-efficient referrals.

The Economic Security Index: A New Measure for Research and Policy Analysis
The Review of Income and Wealth, 2014
with Jacob S. Hacker, Gregory A. Huber, Austin Nichols, Philipp Rehm, Mark Schlesinger, and Robert G. Valletta

Jacob S. Hacker, Gregory A. Huber, Austin Nichols, Philipp Rehm, Mark Schlesinger, Robert G. Valletta, and Stuart Craig. “The Economic Security Index: A New Measure for Research and Policy Analysis,” The Review of Income and Wealth, July 2014, Vol 60, Issue S1: S5-S32.

This article presents the Economic Security Index (ESI), a new measure of economic insecurity. TheESI assesses the individual-level occurrence of substantial year-to-year declines in available householdresources, accounting for fluctuations not only in income but also in out-of-pocket medical expenses. Italso assesses whether those experiencing such declines have sufficient liquid financial wealth to bufferagainst these shocks. We find that insecurity—the share of individuals experiencing substantial resourcedeclines without adequate financial buffers—has risen steadily since the mid-1980s for virtually all sub-groups of Americans, albeit with cyclical fluctuation. At the same time, we find that there is substantialdisparity in the degree to which different subgroups are exposed to economic risk. As the ESI derivesfrom a data-independent conceptual foundation, it can be measured using different panel datasets. We findthat the degree and disparity by which insecurity has risen is robust across the best available sources.

Working Papers and Works in Progress

Vertical Integration and Control: Evidence from Medical Technology
with Matt Grennan, Joseph Martinez, and Ashley Swanson

Hospitals and physicians – which have historically acted as organizationally and financially distinct co-producers of care – have become increasingly integrated in recent years. Firms’ stated objectives for physician practice ownership have focused on sharing back-office functions, improving information flow, and facilitating care coordination. However, recent evidence on physician-hospital integration suggests that it primarily leads to higher prices and greater steering of patients to owning facilities, without concomitant improvements in patient outcomes.

In this paper, we ask whether physician-hospital integration enables hospitals to resolve agency problems between administrators and physicians, focusing on hospital purchasing of medical devices. While hospitals negotiate prices for – and bear the cost of – implantable medical devices, at point of use these products are selected by physicians whose choices may be price-insensitive due to brand loyalty or inattention. These implantable medical devices account for 23 percent of hospital operating costs, and prices vary widely across hospitals, suggesting large potential savings in the cost of health care delivery. Hospitals’ seeking to negotiate lower prices through bargaining must be able to credibly remove the supplier from its choice set, and hospitals and physicians often disagree about tradeoffs regarding price and perceived quality across competing brands. Hospitals would prefer to procure those brands that are cheapest, subject to meeting a basic quality standard. However, they must also cater to the preferences of surgeons who may take their profitable procedures elsewhere.

This paper examines the possibility that hospital employment of physicians changes this paradigm. Using machine learning algorithms, physician practice tax identifiers, survey data on hospital integration, and a large sample of practices with validated integration, we find that physician integration in the U.S. increased from 27% of physicians in 2008 to 45% in 2016, with significant variation across geographies and specialties. We combine these physician integration data with unique hospital-level data on pricing and utilization of medical devices, as well as data on procedural volumes. We ask whether hospitals and health systems achieve lower costs in purchasing of medical devices after acquiring the practices of surgeons who implant those devices. We then explore the extent to which savings are explained by renegotiation of procurement contracts, holding utilization fixed, vs. utilization changes in the form of standardization, brand switching, and expansion in procedure volume due to greater steering.

Who Pays for Rent-Seeking in Health Care? The Effect of Hospital Mergers on Local Labor Markets
with Zarek Brot-Goldberg and Zack Cooper