Working Paper: NBER ID: w27578
Authors: Jason Abaluck; Mauricio M. Caceres Bravo; Peter Hull; Amanda Starc
Abstract: Competition in health insurance markets may fail to improve health outcomes if consumers are not willing to pay for high quality plans. We document large differences in the mortality rates of Medicare Advantage (MA) plans within local markets. We then show that when high (low) mortality plans exit these markets, enrollees tend to switch to more typical plans and subsequently experience lower (higher) mortality. We develop a framework that uses this variation to estimate the relationship between observed mortality rates and causal mortality effects; we find a tight link. We then extend the framework to study other predictors of mortality effects and estimate consumer willingness to pay. Higher spending plans tend to reduce enrollee mortality, but existing quality ratings are uncorrelated with plan mortality effects. Consumers place little weight on mortality effects when choosing plans. Moving beneficiaries out of the bottom 5% of plans could save tens of thousands of elderly lives each year.
Keywords: Health Insurance; Medicare Advantage; Mortality Effects; Consumer Choices
JEL Codes: C26; I11; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reassigning beneficiaries from lowest 5% of plans (H55) | prevent around 10,000 elderly deaths annually (I12) |
| exit of low-quality plans (L15) | improved health outcomes for enrollees (I18) |
| one standard deviation increase in plan quality (L15) | decrease in beneficiary mortality (J17) |
| higher spending on plans (H51) | lower enrollee mortality (I14) |