Ph.D. Candidate in Public Affairs, Paul H. O’Neill School of Public and Environmental Affairs, Indiana University Bloomington. Expected May 2027.
I study how intergovernmental fiscal rules shape what state and local governments actually spend — from Medicaid provider taxes and federal deduction caps to the way short‑term rental markets reshape municipal revenue. I also teach undergraduate public budgeting and finance at the O’Neill School.
Whether provider taxes expand Medicaid resources — or let states reduce their own fiscal effort.
Drafts are available on request.
Ikeya, Lady L. 2026. “Federal Incentives, State Strategy: Medicaid Provider Taxes and State Fiscal Effort.” (Job Market Paper)
Provider taxes are a central but opaque feature of Medicaid finance. They allow states to tax health care providers, use the revenue as part of Medicaid’s non-federal share, and draw federal matching funds. This paper asks whether Medicaid provider taxes expand Medicaid resources or allow states to reduce state fiscal effort. I construct a state-year panel of provider-tax adoption by provider class and link it to NASBO and CMS Medicaid finance data. Using stacked-cohort difference-in-differences designs, I find that adopting any provider tax is associated with an 11 percent decline in Medicaid General Fund spending from NASBO with no corresponding increase in total Medicaid spending. A decomposition of CMS spending reports suggests that the decline in reported state Medicaid financing appears in Medicaid service payments rather than administrative spending. Heterogeneity results are strongest in states with broader provider-tax portfolios and higher baseline General Fund reliance. The findings suggest that provider taxes function not only as Medicaid financing tools but also as instruments of state fiscal strategy.
Ikeya, Lady L., and Sewon Kim. 2026. “The Effect of Airbnb on Local Governments’ Budgets.” (R&R, Regional Studies)
Digital platforms are reshaping regional housing markets, yet evidence on their implications for subnational public finance remains limited. This paper estimates the causal effect of the expansion of the short-term rental (STR) market on county government revenues and expenditures across all U.S. counties. To address endogeneity, we leverage quasi-experimental variation from the 2017 solar eclipse and estimate an instrumental-variables model with county- and year-fixed effects. We find that increased platform penetration reduces property and sales tax revenues, as well as spending on public welfare and education. The results imply changes in tax revenues and a shift in resource allocation by local governments where STRs have penetrated deeper into the housing market.
Ikeya, Lady L., and Megdalynn Fisher. “Evolving State Medicaid Finance in the Twenty-First Century: Federalism, Expansion, Delivery Reform, and Policy Innovation.” (Abstract accepted for the Public Budgeting & Finance special symposium)
This paper examines how Medicaid financing evolved from 2000 to 2025 and what that transformation implies for state public budgeting and intergovernmental finance. Over the first quarter of the twenty-first century, Medicaid has become the largest fiscal program in most state budgets and the primary channel through which federal funds flow to states. Yet existing research treats key components of Medicaid finance (such as eligibility rules, federal matching rates, provider taxes, and waiver policies) in isolation.
The integrated account highlights the role of system-level shocks and policy responses in reshaping Medicaid program finance. We distinguish between major economic disruptions (e.g., the Great Recession and the COVID‑19 pandemic) and major policy changes, including the Affordable Care Act, changes to federal matching rates, and the expansion of financing strategies such as provider taxes, intergovernmental transfers, certified public expenditures, managed care payment systems, and Section 1115 waivers. These disruptions and policy responses changed enrollment, spending growth, and the distribution of costs between federal and state governments, while also altering state fiscal capacity, risk exposure, and incentives. Empirically, the paper combines descriptive trend analysis with stylized state-year models that depict changes in enrollment, spending, and federal-state financing shares associated with ACA expansion and shifts in federal matching policy.
This paper reconceptualizes Medicaid as a dynamic intergovernmental fiscal system, showing how successive policy shocks transformed a relatively straightforward matching grant program into a complex fiscal architecture shaped by federal incentives, state financing strategies, and institutionalized policy variation. This broad perspective provides a comprehensive baseline for understanding the evolution of state Medicaid finance in the first quarter of the twenty-first century.
Ikeya, Lady L. “Labor Cost Trends in Nursing Homes: Drivers and Policy Implications.”
Public programs often finance essential services through private and nonprofit providers, but the financial condition of these providers depends heavily on public payment policy. This paper studies that relationship using U.S. nursing homes as a case of publicly financed service delivery in a labor-intensive sector. Nursing home care has limited scope for labor-saving productivity growth, making providers vulnerable to Baumol-type cost pressure as wages and operating costs rise with the broader economy. Because Medicaid is the dominant payer for long-stay nursing home care, state payment policy is central to provider revenues, margins, and service capacity. Using facility-level Medicare cost report data from 2011 to 2024 linked to state Medicaid financing, regulatory, and economic measures, I document trends in nursing home revenues, costs, margins, occupancy, bed supply, payer mix, and ownership structure. I then examine whether provider financial conditions differ across state public payment environments, with particular attention to Medicaid reimbursement generosity, Medicaid dependence, staffing regulation, minimum wage policy, and certificate-of-need regulation. The findings provide evidence on whether public payment systems supply sufficient resources to sustain provider capacity in a sector that serves a large Medicaid population.
Ikeya, Lady L. “Balancing the Bottom Line: Labor Costs and Input Choices in Nursing Homes.”
Labor-cost shocks play a central role in shaping provider behavior in labor-intensive health care settings such as nursing homes. However, existing research largely focuses on whether costs affect staffing and quality, leaving open the question of which margins providers adjust when labor costs rise. Using facility-level administrative data from 2011–2017, I exploit variation in state minimum wage changes and differential exposure to low-wage labor to identify the effects of labor-cost shocks on staffing levels and staffing composition.
I find that minimum wage increases have little effect on total nursing hours per resident day, indicating that facilities largely preserve the quantity of care. Instead, adjustment occurs primarily through changes in staffing composition: facilities reduce reliance on certified nursing assistants and, in some cases, increase the share of licensed practical nurses, while changes in registered nurse staffing are limited. These responses are heterogeneous and concentrated among less exposed facilities, while highly exposed facilities exhibit muted adjustment, consistent with binding financial constraints. These findings suggest that in regulated care settings, providers respond to labor-cost shocks by re-optimizing input mix rather than reducing service quantity, highlighting the importance of distinguishing between quantity and skill composition when evaluating labor-market policies in health care.
Ikeya, Lady L. “Public Revenue Pass-Through in Contracted Long-Term Care.”
Heim, Bradley, Maggie Liu, Andrey Yushkov, Lady L. Ikeya, and Marc Plooster. “The Impact of a Federal Deduction Cap on State and Local Governments’ Fiscal Behavior.”
The Tax Cuts and Jobs Act of 2017 significantly limited the federal deductibility of state and local taxes (SALT), both by placing a cap on the amount of SALT that could be deducted and by increasing the standard deduction. This study examines the effects of these changes on local and state government fiscal behavior. Using data from the IRS population files of individual income tax returns spanning 2014–2022, we calculate county and state-level after-tax cost of paying SALT before and after the implementation of TCJA. This data is then matched to data on state and local revenue and expenditures from the State and Local Finance data collected by the U.S. Census Bureau, as well as data on state sales and income tax rates collected by the Tax Foundation. Following the previous literature, we estimate the impacts of changes in the after-tax cost of SALT on tax revenue, tax parameters, and state and local expenditures using two-way fixed effects models in which we instrument for the endogeneity of the after-tax cost.
A first course in government finance: the budget cycle and its politics, revenue systems and tax incidence, debt and capital budgeting, and the intergovernmental transfers that tie federal, state, and local budgets together. Students work directly with published budget and financial-report data.
Lab Instructor · O’Neill School, Indiana University
Lab Instructor · O’Neill School, Indiana University
You listened when we complained about something and changed that to improve the quality of the course. That was awesome.
I truly enjoyed being in this class, and Professor Ikeya was amazing and making it engaging. Even though the students in the class didn’t seem motivated and kind of seemed to manipulate things in situations because the class didn’t motivate them, I felt motivated going to that class everyday and learning more about public finance.
I like how the instructor engages with every student in the lab session and works around the room to answer questions.
The way she prioritizes the learning for the students as well as the progression of the course as a class.
She is helpful if you ask for help.
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