Paying more for less? Insurer competition and health plan generosity in the Medicare Advantage program

Pelech, Daria

doi:10.1016/j.jhealeco.2018.07.002

Cited by 11 publications

(18 citation statements)

References 22 publications

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“…Pelech’s (2015) study of regulatory shocks to the market structure in MA on premiums and benefits is also consistent with a kinked demand. 31 As plans gain market power, they ought to increase premium, decrease benefits, or both.…”

Section: Rules For Bidding and Premium Setting: Putting A Kink In supporting

confidence: 55%

“…In fact, there was little evidence for a premium increase overall, whereas benefits did decrease, consistent with plans being “stuck” at the kink of a zero premium. Furthermore, Pelech (2015) found benefits responded much more to a change in market structure for plans at zero premium than for plans charging a positive premium, as also would be predicted if premiums were stuck at zero. 32 …”

Section: Rules For Bidding and Premium Setting: Putting A Kink In mentioning

confidence: 71%

“…In 2015, there was an average of just 3.2 insurers offering plans per county (MedPAC, 2016, 329). The average Herfindahl-Hirschman Index HHI index in counties during 2010–2012 was 4,464 in Pelech (2015). (An HHI above 2,500 indicates “high concentration.”) Product differentiation among plan types (e.g., with respect to network depth) enhances market power for a given number of insurers.…”

Section: Institutional Background and Literature Reviewmentioning

confidence: 99%

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Paying Medicare Advantage plans: To level or tilt the playing field

Glazer

McGuire

2017

Journal of Health Economics

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Medicare beneficiaries are eligible for health insurance through the public option of traditional Medicare (TM) or may join a private Medicare Advantage (MA) plan. Both are highly subsidized but in different ways. Medicare pays for most of costs directly in TM, and makes a subsidy payment to an MA plan based on a “benchmark” for each beneficiary choosing a private plan. The level of this benchmark is arguably the most important policy decision Medicare makes about the MA program. Presently, about 30% of beneficiaries are in MA, and Medicare subsidizes MA plans more on average than TM. Many analysts recommend equalizing Medicare’s subsidy across the options – referred to in policy circles as a “level playing field.” This paper studies the normative question of how to set the level of the benchmark, applying the versatile model of plan choice developed by Einav and Finkelstein (EF) to Medicare. The EF framework implies unequal subsidies to counteract risk selection across plan types. We also study other reasons to tilt the field: the relative efficiency of MA vs. TM, market power of MA plans, and institutional features of the way Medicare determines subsidies and premiums. After review of the empirical and policy literature, we conclude that in areas where the MA market is competitive, the benchmark should be set below average costs in TM, but in areas characterized by imperfect competition in MA, it should be raised in order to offset output (enrollment) restrictions by plans with market power. We also recommend specific modifications of Medicare rules to make demand for MA more price elastic.

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Section: Rules For Bidding and Premium Setting: Putting A Kink In supporting

confidence: 55%

Section: Rules For Bidding and Premium Setting: Putting A Kink In mentioning

confidence: 71%

Section: Institutional Background and Literature Reviewmentioning

confidence: 99%

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Paying Medicare Advantage plans: To level or tilt the playing field

Glazer

McGuire

2017

Journal of Health Economics

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“…The results of the models examining adjusted odds of high-quality clinical process ratings, and adjusted odds of high-quality consumer satisfaction ratings look relatively similar to the main model ( Table 2, Columns 3-4). One notable difference is that MA market concentration was not found to be statistically significantly associated with odds of high-quality clinical process ratings (OR: 1.01, 95% CI: 0.99-1.02, P = .29), but was statistically significantly associated with high-quality consumer satisfaction ratings (OR: 1.02, 95% CI: concentration, we find that plans that tend to operate in more competitive hospital markets (hospital HHI < 2500), as well as highly competitive MA markets (HHI = 100), generally have the lowest predicted probability of receiving a high-quality summary rating (PP: 19.63, 95% CI: 12. 14-30.14).…”

Section: Plan Quality Analysesmentioning

confidence: 68%

“…In a 2018 study, Pelech examines pre-ACA policy changes impacting private fee-for-service (PFFS) plans, finding that reductions in county-level plan offerings led to an increase in expected enrollee out-of-pocket spending and higher premiums for PFFS plans. 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.…”

Section: Studies From the Mid-2000s By Scanlon Et Al Examine Qualitymentioning

confidence: 99%

Competition and health plan quality in the Medicare Advantage market

Adrion

2019

Health Services Research

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Objective To examine the relationship between insurer market structure, health plan quality, and health insurance premiums in the Medicare Advantage (MA) program. Data Sources/Study Setting Administrative data files from the Centers for Medicare and Medicaid Services, along with other secondary data sources. Study Design Trends in MA market concentration from 2008 to 2017 are presented, alongside logistic and linear regression models examining MA plan quality and premiums as a function of insurer market structure for 2011. Data Collection/Extraction Methods Data are publicly available. Principal Findings MA plans that tend to operate in more concentrated MA markets have a higher predicted probability of receiving a high‐quality health plan rating. Operating in more concentrated MA markets was also found to be associated with higher premiums. Among plans that tend to operate in very concentrated MA markets, high‐quality MA plans were associated with premiums as much as two times higher than premiums associated with lower‐quality plans. Conclusions Any policies directed at enhancing insurer competition should consider implications for health plan quality, which may be very different than the implications for enrollee premiums.

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