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

Marika Cabral, Michael Geruso and Neale Mahoney

No 20470, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D4 H22 I11 I13 L1 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-com, nep-hea and nep-ias
Note: AG EH IO PE
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Citations: View citations in EconPapers (20)

Published as Marika Cabral & Michael Geruso & Neale Mahoney, 2018. "Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage," American Economic Review, vol 108(8), pages 2048-2087.

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