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

Marika Cabral, Michael Geruso and Neale Mahoney

American Economic Review, 2018, vol. 108, issue 8, 2048-87

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 percent of increased payments in lower premiums and an additional 9 percent 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 percent in the least competitive markets and 74 percent in the most competitive.

JEL-codes: G22 H51 I11 I13 I18 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20151362
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Citations: View citations in EconPapers (52)

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Working Paper: Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage (2014)
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