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

Abstract

Objective To determine the effect of higher potential benchmark payment rates on the market for Medicare Advantage (MA) Dual‐Eligible Special Needs Plans (D‐SNPs). Data Sources/Study Setting Publicly available county‐level data from 2009 to 2015 regarding the number of D‐SNPs operating within the county, the enrollment in and five‐star quality of score of these plans, and the benchmark amounts used to determine capitated plan payments. Study Design This study exploits the introduction of quality bonus payments to the MA program in 2012, and exogenous geographic variation in the potential size of these bonuses to estimate the effect of benchmark payment increases on the availability, quality, and take‐up of D‐SNPs. We use a difference‐in‐difference estimation approach to compare changes in the market for D‐SNPs in counties eligible for a double bonus to those that are not. Principal Findings The doubling of bonuses was associated with a relative 29 percent increase in the number of D‐SNPs offered (P = 0.021) and 0.1‐star increase in the average quality of available D‐SNPs (P = 0.034). No relative increase in overall D‐SNP enrollment was detected. Conclusions These findings indicate that larger benchmark payment amounts may influence insurers’ decisions of whether to participate in the D‐SNP market but not dual‐eligibles' decision of whether to enroll in these plans. Future research is needed to inform discussions about whether D‐SNPs are a viable mechanism for integrating benefits for dual eligibles and the degree to which Medicare policies should support their continued growth.

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

“…In addition, our research complements a prior literature that uses discrete choice models to examine the relationship between market power and welfare in Medicare Advantage (Town and Liu 2003;Dunn 2010;Lustig 2010;Curto et al 2015). 5 Our finding of an average premium pass-through of 45 percent, 4 As shown in Fabinger and Weyl (2013b), the incidence or ratio of consumer to producer surplus is given by…”

“…Our baseline estimate of ρ = 0.54 allows us to bound the incidence between 0.54 and 1.17 and implies that consumers receive no more than approximately one-half of the marginal surplus from the market. 5 Our paper is also related to the broader literature on MA including Cawley, Chernew, and McLaughlin (2005), who investigate the impacts of MA payment changes in 1997 on MA plan availability; Song, Landrum, and Chernew (2012, 2013), who study the impacts of annual benchmark changes on MA plan bids; Gowrisankaran, with rates approaching 74 percent in the most competitive counties, suggests that private markets can efficiently provide Medicare benefits but that not all markets may be competitive enough to achieve this objective.…”