%0 Journal Article
%T MONITORING FOR WASTE: EVIDENCE FROM MEDICARE AUDITS.
%A Shi M
%J Q J Econ
%V 139
%N 2
%D 2024 May
%M 38644929
%F 19.013
%R 10.1093/qje/qjad049
%X This paper examines the tradeoffs of monitoring for wasteful public spending. By penalizing unnecessary spending, monitoring improves the quality of public expenditure and incentivizes firms to invest in compliance technology. I study a large Medicare program that monitored for unnecessary healthcare spending and consider its effect on government savings, provider behavior, and patient health. Every dollar Medicare spent on monitoring generated $24-29 in government savings. The majority of savings stem from the deterrence of future care, rather than reclaimed payments from prior care. I do not find evidence that the health of the marginal patient is harmed, indicating that monitoring primarily deters low-value care. Monitoring does increase provider administrative costs, but these costs are mostly incurred upfront and include investments in technology to assess the medical necessity of care.