Essays on health care consumption and household finance

This thesis explores how health insurance affects the decisions that individuals make. The first chapter studies the effect of insurance on health care consumption. Nearly 10 percent of teenagers become ineligible for their families' health insurance coverage on their nineteenth birthdays. Due to the federal Emergency Medical Treatment and Active Labor Act, however, they do not lose access to free emergency room care. I develop a straightforward theoretical framework to understand the implications of insurance transitions at age nineteen. I then develop an empirical framework that exploits the discontinuity in health insurance at age nineteen. Using a unique database of 15 million hospital discharge records, I find that Emergency Room (ER) usage rises discontinuously at age nineteen, particularly for minorities and residents of low-income zip codes. As predicted by the theoretical framework, the jump in ER utilization at age nineteen is disproportionately driven by ailments that physicians classify as inappropriate for ER care. I also find suggestive evidence that health care expenditures outside of the ER decline. A large share of the increase in ER utilization at age nineteen takes the form of uncompensated care, the cost of which is born by third parties. These findings constitute some of the first evidence on how the incentives faced by the uninsured affect medical expenditure. The second chapter, written jointly with Matthew Notowidigdo, studies the contribution of medical costs in the decision to declare bankruptcy. Consumer bankruptcies increased eighty-seven percent in the 1990s.