Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage

Abstract

A central question in the debate over privatized Medicare is whether increased government payments to private Medicare Advantage (MA) plans generate lower premiums for consumers or higher profits for producers. Using difference-in-differences variation brought about by a sharp legislative change, we find that MA insurers pass through 45% of increased payments in lower premiums and an additional 9% in more generous benefits. We show that advantageous selection into MA cannot explain this incomplete pass-through. Instead, our evidence suggests that market power is important, with premium pass-through rates of 13% in the least competitive markets and 74% in the most competitive.

The effects of medicare advantage on opioid use

“…The induced incremental enrollment, in turn, allows us to identify the effect of MA-PD plans on opioid prescription rates independent of any unmeasured characteristics of beneficiaries or areas -as long as the urban floor is not correlated with these unmeasured characteristics. This approach has been used in other work to identify the effect of enrollment in Medicare Advantage on other outcomes, such as the hospitalization rate, medical spending, prescription drug use overall, and mortality (e.g., Afendulis, Chernew, and Kessler 2017;Cabral, Geruso, and Mahoney 2018;Duggan, Starc, and Vabson 2016;Starc and Town 2018).…”

The effects of plan payment rates on the market for Medicare Advantage Dual‐Eligible Special Needs Plans

“…Larger benchmarks have been found to increase the availability of regular plans, insurer entry into MA markets, the generosity of benefits offered, regular MA enrollment, and insurer profits. [12][13][14] The connection between higher benchmarks and insurer entry and increased MA enrollment is straightforward. Higher benchmarks allow MA plans to offer more expensive products at lower prices.…”

Competition and health plan quality in the Medicare Advantage market

“…19 A 2014 study by Cabral et al exploits the introduction of MA payment floors in 2000, finding that, among plans receiving higher payments, greater market share was associated with lower "pass through" of those payments to enrollees in the form of reduced premiums. 20 McCarthy and Darden's 2017 study examines the impact of MA quality ratings on premiums and plan offerings for 2009-10, finding that contracts receiving higher star ratings raised their premiums in the subsequent year. 21 Taken together, these studies suggest predominantly positive relationships between market concentration and premiums, and between star ratings and premiums.…”