Association for Public Policy Analysis & Management

This study examines a previously under-studied determinant of public insurance coverage: perceived quality of public health care. Theoretically, coverage through public insurance would increase if the eligibility for public insurance becomes more generous and if the quality of care provided by public insurance improve. Empirical work examining the determinants for public insurance coverage have traditionally focused on the effects of eligibility expansion, while works on the effects of health care quality is lacking.

This study seeks to fill the gap by looking at how information about Veteran Affairs (VA) hospital quality affects the insurance coverage of veterans. Veterans are often eligible to enroll in the VA health care system, which provides medical services almost free of charge through VA facilities. Veterans would be more willing to enroll in VA if they could receive quality health care from VA facilities.

To establish a causal relationship between perceived quality of care and VA enrollment, this study exploits exogenous variation in perceived quality generated by the introduction of VA hospital quality report card in 2008. The introduction of quality report card significantly increased veterans’ awareness of hospital quality for two reasons. First, this was the first time facility-level quality information is provided to public. Second, the report cards provided composite metrics, which were created through condensing many individual measures into a single measure. The composite metrics provided transparent information on the overall quality. If the proposed mechanism – information about quality affects VA enrollment – were correct, we would anticipant an increase in VA enrollment among veterans living near high-quality VA facilities.

Data used in this study are constructed by merging information on the quality of VA hospital with health insurance coverage information from the Current Population Survey, survey years 2006-2015. Individual data from the CPS is matched with VA hospital based on the MSA of residence. Of all 124 VA facilities that have composite quality scores reported for both inpatient care and outpatient care, 101 are matched with observations in the CPS. Analysis sample are restricted to working age male veterans without a college degree, who reside in MSAs that have been successfully matched with VA facilities.

The effects of perceived hospital quality is measured by the association between the reported quality score of VA facility and insurance coverage of veterans living in the same MSA. Findings suggest that the demand for VA coverage increased in areas with high quality VA facilities, once the quality information was made available to public. After the introduction of quality report card in 2008, a one-standard-deviation increase in quality score for outpatient care is associated with a 1.7 percentage point (11.9%) increase in coverage through VA. Such strong association did not exist in years before the introduction of quality report card. I find little evidence for crowd-out: the increase in VA coverage is not accompanied with a decrease in ESI coverage. The effects of perceived hospital quality are stronger among veterans without any college education, veterans who are unmarried, and veterans who are near retirement age.