Q&A: Assistant Professor Maggie Shi on Health Economics, Public Spending and Joining the Harris Community

Maggie Shi joined the Harris faculty as an assistant professor on July 1, 2023. A Faculty Research Fellow at the National Bureau of Economic Research (NBER), her research focuses on the intersection of health economics and public economics. She is particularly interested in finding approaches to incentivize the US healthcare system to provide only medically necessary care, and designing policies that deliver both high quality healthcare and that also curb wasteful spending.

She graduated with her PhD in economics from Columbia University in 2022 and had worked as a postdoctoral fellow at the NBER before coming to Harris. She joins three other new faculty for the 2023-24 Academic Year. 

We recently sat down with Professor Shi to learn more about her work.

How can you tell how much healthcare spending is being wasted?

I've been working on this topic for most of my career. I’m finishing a paper that looks at audits for medical necessity in the Medicare program. As part of that, I rely on new data from the Centers for Medicare & Medicaid Services (CMS), the federal agency that administers Medicare, which I was the first researcher to have access to. The data is from a large Medicare program that audited hospital stays for whether they should be considered necessary or not. This audit is a fairly hands-on documentation review that sends nurses well versed in Medicare's rules to make the assessments.

What have you found?

Perhaps not surprisingly, we found that hospital stays are the most expensive expenditure for Medicare, by far.  Our analysis revealed that about 1% of all hospital-stay spending for this program was deemed to be unnecessary. That’s billions of dollars!

These results got me thinking, could there be potentially even more savings if hospitals were regularly audited? Do audits change a hospital’s admission behavior going forward?

Pursuing these questions led to another rather astounding result: yes, one percent of hospital revenue was mechanically reclaimed in the program as a result of being deemed unnecessary, but there was an even greater savings –  nine or tenfold –  if you take into account how providers ultimately responded to these audits.  So, it appears that this approach to audits can have an even larger effect on medical spending than it would initially seem. 

What are some of the policy implications?

The program that I studied allowed the government to reclaim money going back three years on unnecessary hospital stays. These auditors weren’t like IRS salaried government employees who may or may not have an incentive to root out waste.  These were contracted nurses who received a percentage of the money that they reclaimed.

Policymakers should look at – and try to learn from – the kinds of wasteful spending that the program commonly identified before it was shut down, because the savings potential is so significant.

Finding wasteful spending seems to be a theme in your work.

Definitely. I see it as trying to find other policy mechanisms that can change the quality of public spending. In another paper, I looked at a decentralization reform in Italy, which gave municipalities more responsibility over levying taxes in their own jurisdictions. Before the reform, these municipalities received substantial transfers from the national government, and weren't as accountable to taxpayers because they did not have to generate revenue from taxes directly.

We found evidence that these municipalities, which are theoretically closer to the people, are less likely post-reform to spend on administration and more likely to spend it on public services – things like nurseries, lighting, and so on.

This suggests that placing this additional accountability at the local level of raising revenue changes spending decisions.  It tilts them more towards investment in public-facing goods and services rather than bureaucracy and administration.  

What else have you worked on?

One paper that people might find interesting is a forthcoming paper about the mandate in the Affordable Care and Patient Protection Act (ACA) that insurers allow people up to the age of 26 to stay on their parents’ insurance. We already know that employer-based healthcare has a distortionary effect on labor outcomes: you might be less willing to move from job A to job B if job A offers insurance, whereas job B doesn't, and this may vary for individuals depending on how much someone values that insurance. When you think about adding dependents on health insurance, as a mandate, this becomes a sort of natural experiment for how parents process insuring their adult children. What we find is that parents, surprisingly, are quite aware of the fact that their dependents in this case are young adults who are relatively healthy, and for the most part, are not actually using this insurance that much. Still, parents are very responsive, however, in that they will stay at their job, if to provide their child with 12 additional months of coverage. We are planning on putting out a working paper very soon, and I look forward to sharing it with the Harris community.

Are you teaching this year?

Yes. I'm very excited!

In Winter Quarter, I'll be teaching an advanced R course that is part of a Certificate on Data Analysis program. We're going to do some fun things, actually – things that I had to learn as part of working on that decentralization paper. Web scraping, fuzzy matching.  We’ll be focusing on what to do when you're exposed to real world data that may not be perfectly clean.  We’ll explore how you can transform it into something that you can legitimately work with.

I'm also going to be teaching the second part of the PhD in Micro course. We’ll work through some models and topics that should be useful for when the students are writing models to include in their own papers, as they pursue their own research careers.

Why Harris?

The great thing about Harris is that there are so many people who speak the same policy and analytical language; we're all thinking about applied micro topics with a policy focus. I've met so many scholars here who are using the same methods I use but applying them to different topics, in areas like early childhood education, homelessness, and energy and environment.

What’s something about Chicago you’re excited to experience?

I'm a big foodie, so I’m excited to experience the diversity of the food around the city – the different neighborhoods and their cuisines.  I hope people will send me recommendations