Colleen Carey, assistant professor of economics at Cornell University, once envisioned a career in international development. As a college student, she learned Arabic and even spent a couple of summers in Yemen to cultivate an expertise in that part of the world. But plans change. A series of interesting opportunities – including a stint at the White House – redirected her focus to the United States health care industry and laid the cornerstone for her life’s work.

In a recent interview, Carey, who is concluding a visit to Princeton’s Center for Health and Wellbeing (CHW), discussed her research on government-managed health insurance markets, physician behavior, and other dynamics that influence domestic health policy, equity, and outcomes.

Q. Interestingly, you studied international development as an undergraduate at Yale University but developed an expertise in U.S. health systems and policy. What sparked your initial interest in global health?

A. I started thinking about equalizing opportunities and outcomes back in high school. I didn’t grow up poor, but I didn’t grow up rich either and hadn’t been out of the United States much at all. I took some classes that opened my eyes to the level of disparity and thought it was crazy that certain people had so many advantages just because they were born in a different country or zip code. Looking at the numbers was mind-boggling. For example, someone making $10,000 per year is considered poor in the United States but is middle-class in Mexico and wealthy in India. I wanted to learn more about this problem, particularly in developing countries.

Q. After graduating from Yale, you launched your career at RAND Corporation, a global policy research organization. How did that experience transpire and shape your path?

A. Honestly, I did not have much of a plan. I moved to Los Angeles right out of college and while I was applying for jobs I happened to drive past RAND. I didn’t know what I wanted to do at the time, but I liked research so I decided to apply for a job and they hired me. While I was looking for an opportunity in international development, they needed someone to study U.S. health care. RAND was conducting early evaluations of Medicare Part D, the prescription drug benefit of Medicare, which was new in 2006. As it turned out, that work inspired the topic of my dissertation in graduate school and established the foundation for my career. Medicare is among our largest federal expenditures, and the government would love to do a better job of administering the program – by saving money or delivering higher quality services. But they need advice, and research can help.

Q. Why did you decide to pursue a Ph.D in economics?

A. That was also somewhat random. I had been exposed to economics as an undergraduate but wasn’t an economics major. I didn’t love it, actually. My perspective changed at RAND, which is very interdisciplinary. The person I worked for was an M.D. with a Ph.D. in public health, but there were also economists, sociologists and statisticians on the team. I wanted more technical training and data analysis skills, and everyone told me that the best way to get that was with an economics degree. Also, economics plays a big role in international development – which was still something I wanted to do. And I like math. The field seemed to be a good fit for me and the path to graduate school made a lot of sense, so after two years at RAND I went to Johns Hopkins University to study economics.

Q. You worked at the White House while earning your Ph.D., which must have been exciting for a young scholar! Tell me about your experience as a staff economist for the Council of Economic Advisors.

A. The Council of Economic Advisors is essentially a think tank for the White House staffed by economists who have paused their academic careers to serve in government. In fact, Cecilia Rouse [former Dean of Princeton’s School of Public and International Affairs] is the Council’s chair right now. The Council also employs graduate students for one year appointments, which is what I did.

The Council was preparing to implement the Affordable Care Act (ACA) when I arrived, and that became the focus of my work. We set up the markets to run as smoothly as possible and tried to understand which aspects of U.S. health care would become most pressing once everyone, or nearly everyone, was enrolled in health insurance. Today, I think about how the Covid-19 pandemic would have unfolded if not for the ACA, and a large percentage of hospitalized patients were uninsured and ineligible for Medicaid or other programs. Our country would be facing a much worse public health crisis.

Q. Was that year at the White House a turning point, shifting your focus to domestic health policy?

A. Definitely. I became 100 percent invested in U.S. health care and continue to be fascinated by it. I’m interested in all of the different roles and strategic interactions. You have physicians, for example, who care about their patients but are also trying to get through the day. They want to avoid excessive paperwork and want autonomy when it comes to prescribing medications. Additionally, my research shows that some physicians respond to reimbursement incentives, demand shocks and price changes. Then you have patients who are trying to make the best medical decisions in partnership with their doctors, but they are also thinking about the costs of health care and whether or not they can afford that care.

What’s cool about the U.S. health system for me is that each of these interactions could be a career. There are people who focus on physician-patient interactions and others trying to understand the interactions between health care systems and insurance providers. There are interesting economic questions, at every scale, in each of these interactions, and so many issues to study.

Q. Before joining the faculty at Cornell University, you completed postdoctoral research on health policy research with the Robert Wood Johnson Foundation. What led you there?

A. The Robert Wood Johnson Foundation previously offered fellowship programs for social scientists and physician researchers to conduct research about the U.S. health care system. These two-year fellowships were quite prestigious, so I applied for one and deferred my appointment at Cornell to take advantage of the opportunity. Interestingly, the position was based at the University of Michigan, where my former boss at the Council of Economic Advisors, Tom Buchmueller, was a professor. We collaborated on several projects that resulted in publications on my CV and continue to work together. In fact, he has become an important mentor to me.

I ended the postdoc experience with a lot of research ideas and have pursued those topics at Cornell and, more recently, here at Princeton.

Q. Your research reflects a special interest in federal regulation of U.S. health insurance markets. Why attracted you to this particular space?

A. It was clear to me that the government wanted help with designing and operating insurance markets within Medicare and Medicaid. Those insurance markets have become a major way of delivering Medicare and Medicaid benefits. I’ll try to explain the key challenge with an example. Let’s say that I expect to spend $10,000 a year in health care costs and you expect to spend $2,000 a year in health care costs. Insurers would rather enroll you than me because I’m too expensive. Medicare does not allow insurers to turn patients away, but the insurers are very good at gaming the system.

As a countermeasure, Medicare tries to guess how much money each beneficiary will spend and then basically subsidizes the insurers. In the previous example, Medicare might give the insurer $8,000 for enrolling me, so even though I’m more expensive, they’ll let me in because the government makes up the cost difference. That’s how Medicare-operated insurance markets like Medicare Part D or Medicare Advantage work: beneficiaries all pay the same premiums, but behind the scenes the government is sending subsidies around based on a guess about how much each person will cost. Unfortunately, there are some real problems with how they make that guess. If I could tell the government a better way to project spending, and they get it exactly right, the market would provide better service to those who are sick.

Q. What has been the focus of your research during your visit to Princeton’s Center for Health and Wellbeing? Perhaps you could highlight one of your main projects?

A. I’ve done a lot of work on the impact of provider reimbursement on health care utilization of low-income individuals. In the United States, low-income Medicare beneficiaries can also be enrolled in Medicaid. The nice thing about being enrolled in Medicaid is that you do not have to pay the cost-sharing in Medicare, which is significant. Originally there was a vision that states would pay the cost-sharing on behalf of these low-income individuals. However, over time, many states passed laws negating that practice. What you’re left with, unbeknownst to most patients, is a situation where a doctor receives greater reimbursement for a high-income elderly or disabled patient than a low-income elderly or disabled patient. Both patients are entitled to Medicare, but because one is also enrolled in another insurance program, the provider bizarrely gets paid less money to treat the one with dual coverage.

This disparity in payment leads to a disparity in access to care. People enrolled in both programs often report more difficulty accessing health care and are less likely to have any doctor visits in a given year. These patients also experience more preventable hospitalizations and Emergency Department visits (encounters that could have been avoided if they had been getting regular primary care) and experience worse health overall.

In response, the federal government implemented an Affordable Care Act policy that briefly raised the payments for treating these low-income Medicare beneficiaries. During my time at Princeton, I studied the impact of that reform and co-authored a paper summarizing our results.

Q.  What was your most significant finding?

A. We found that increasing reimbursement for low-income Medicare beneficiaries increased their utilization of primary care and completely closed the gap in access to health care between higher-income and low-income enrollees.

Often, in an effort to make a scarce dollar stretch further in programs for low-income individuals, the government offers lower payments for professional services that are part of the program. That’s what happened here; Medicaid famously pays lower rates for medical services than any other insurer. But economizing on payments to professionals does have a cost, as demonstrated by this study. We show that these cuts play a key role in reducing access to care for low-income populations and increasing health disparities. This is one way that programs for the poor become poor programs.

Q. Will future projects remain focused on U.S health care markets, or would you like to expand into other areas? What is your hope regarding the impact of your research?

A. I’ll probably stay pretty focused on U.S. health care. I’m not bored. Sometimes I think about working a little more on issues related to aging, like retirement security and policy, and the overall well-being of elderly-headed households.

From an economic standpoint, I hope that my work helps to better align the health care dollar with value. That’s the overarching theme of my research. From my perspective, it’s okay to spend more money on health care if we get better outcomes as a result.

I also hope that my research improves health equity. Generally, people with predictably higher health care costs, such as those with chronic conditions, are not served as well by Medicare markets. Medicare is a public program that is supposed to provide an equal and valuable benefit to everybody, but that is not the case when there are errors in how the markets are designed. That is concerning and a problem we need to solve.

Q. Any reflections regarding your visit to Princeton, which is coming to a close?

A. Princeton has been a great place to advance my research. I will miss interfacing and collaborating with the faculty and staff, particularly at the Center for Health and Wellbeing. I’ve been a long-time fan of Janet Currie and Kate Ho, so I really appreciated the opportunity to get to know them better and discuss our work. I also will miss the campus… and Small World Coffee!

Q. Finally, would you be willing to share a fun fact?

A. While here I have occasionally played Ultimate Frisbee with Gilbert Collins. I play a lot, and he’s played throughout his life, so it has been a lot of fun!