Working Paper: NBER ID: w19070
Authors: Katherine Baicker; Michael Chernew; Jacob Robbins
Abstract: More than a quarter of Medicare beneficiaries are enrolled in Medicare Advantage, which was created in large part to improve the efficiency of health care delivery by promoting competition among private managed care plans. This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial - offsetting more than 10% of increased payments to Medicare Advantage plans.
Keywords: Medicare Advantage; hospital utilization; spillover effects; healthcare costs
JEL Codes: I1; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicare Advantage (MA) penetration (I18) | hospitalization costs (I11) |
| Medicare Advantage (MA) penetration (I18) | hospitalization rates (I18) |
| Medicare Advantage (MA) penetration (I18) | length of stay (C41) |
| Medicare Advantage (MA) penetration (I18) | overall costs of hospitalization (I10) |