Politics and Health Care Spending in the United States

Abstract

We uncover political dynamics that reward and reinforce increases in US health spending by studying the passage of the 2003 Medicare Modernization (MMA). We focus on a provision added to the MMA, which allowed hospitals to apply for temporary Medicare payment increases. Hospitals represented by members of Congress who voted ‘Yea’ to the MMA were more likely to receive payment increases. The payment increases raised local health spending and led to suggestive increases in health sector employment. Members of Congress representing hospitals that got a payment increase received large increases in campaign contributions before and after the program was extended.