Dustin Tracy

My primary research focus is health economics, particularly policy to contain health care cost and maximize the value of money spent on health care. I examine both the supply and demand sides as well as the market institutions that shape how they meet.

Laboratory experiments offer the control of exogenous variation without confounding factor, so are an invaluable tool for testing policy, particularly in an area like health where it can take decades to realize outcomes of investments and prevention efforts. By analyzing human subjects' responses, we gain insight into how policy is perceived, and better simulate long-term impacts. This saves time, money and lives when impact are uncertain. For a research program with collaborators at the Economic Science Institute, Hilly Kaplan, Kevin James and Steve Rassenti, I have created a laboratory environment modeling the intertemporal tradeoffs people face when making health decisions. One of the immediate priorities was to test the benefits and drawbacks of cost sharing in insurance. My job market paper An Experimental Investigation of Health Insurance Policy and Behavior tests offering actuarially fair insurance to offering employer-based insurance. In the model, subjects face stochastic health shocks; age determines the probability and fitness investment determines size. The employer plan withhold a fraction of income and uses that money to subsidize insurance, which subjects can purchase at a flat rate. We find it performs better than predicted because, while it suffers the expected moral hazard—subject invest less in fitness, it largely alleviates the need for long-term planning which subjects cannot do well.

We plan to utilize the environment to tests many more policies and theories. We have already run some sessions for Determinates of Effort to Prevent Chronic Disease a Laboratory Experiment in which we introduce chronic disease, and increasing (vs. flat) income. In my JMP, health shocks reduce health but it could be restored with (insurance-funded) investment. In contrast, incurring a chronic disease resulted in health liabilities that lasted the remainder of life. We introduced increasing income to test if it could induce the cross-class difference in prevention efforts found in observational studies. Another variant of that environment, we are planning are "hybrid" (field and lab) sessions in which subjects health decisions are no longer stated, but actually exercise as measured by accelerometers. Another key finding in my JMP was that subjects’ response to financial incentives is muted, so we also plan to utilize the environment to further explore the impact of non-financial incentives, including but not limited to social and cultural factors.

Another line within my research program expands how behavioral economic findings can be applied these decisions and markets. A coming work analyzes of the experiment my JMP reports, for evidence of probability weighting, present bias, and cognitive load, contributing to decisions that are detrimental to health. This complements two papers, which stem from my dissertation. In A Reassessment of the Potential for Loss-Framed Incentive Contracts to Increase Productivity: a Meta-Analysis and Real-Effort Experiment, we find the lab experiments testing this effect had larger standardized sizes than the field experiments, and attribute that to small sample sizes paired with publication bias. In our lab experiment, we use a within subject design to compare gain versus loss frame and elicit preferences. We find a more modest effect size in line with a trim and fill correct to the meta-analysis, and that the effect is driven by the small fraction of the population who prefer loss frame. We also find that it may be possible to induce the effect without explicit penalties. While it focus on labor market applications, the insights they offer about loss-framed incentives and their limitations have implications for the potential to applying behavioral nudges to health goals.

Similarly, Rethinking Overconfidence studies of overconfidence and optimistic bias in lab experiment. Subjects play a computerized game of rock paper scissors for pay. They shoot against a fixed partner 10 times and are given feedback about their outcomes relative and how it compares to other outcomes. They are then asked for the next partner, to predict how well they will do and if they want their pay to be conditional on their relative performance to the group. We find evidence of asymmetry in weight positive and negative feedback in updating predictions. I am working to build upon findings, and test their implications for long-term health management.

A fundamental problem in health care markets is that they are credence goods-the patients’ depend on doctors' expertise. Disclosing Conflicts of Interest in the Market further investigates issues regarding gifts to prescribers with laboratory experiment, which tests how market competition and reputation’s ability to discipline an incentive to give biased advice. Credence Markets with Uncertainty investigates how two critical features of medical decisions—there are honest mistake, and even the right decision may not lead to a good outcome—increase recommendations that are more profitable to providers.

The Impact of Vertical Integration in Complex Markets is a lab experiment to investigate the vertical integration of prescription benefit managers—companies who negotiate with pharmaceutical manufactures on behalf of insurers—with pharmacy chains who the insurers customers will get their medications. We plan to use the same environment to study the problem of Inducing the Production of Orphan Drugs—a set of drug for which patent protection has expired, but lack producers. Generally, they are used in rare situation, but often crucial. While numerous manufactures could start producing them, there is a hesitancy to enter such small markets, particularly when there is uncertainty about competition.

I am excited by the possibility a new institution presents to expand my network of collaborators. New angles of analysis of conglomeration of issues driving high healthcare costs and poor health outcomes.