Insurers’ Negotiating Leverage and the External Effects of Medicare Part D

Darius Lakdawalla and Wesley Yin ()
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Wesley Yin: University of Southern California and NBER

The Review of Economics and Statistics, 2015, vol. 97, issue 2, 314-331

Abstract: By influencing the size and bargaining power of private insurers, public subsidization of private health insurance may project effects beyond the subsidized population. We test for such spillovers by analyzing how increases in insurer size resulting from the implementation of Medicare Part D affected drug prices negotiated in the non-Medicare commercial market. On average, Part D lowered prices for commercial enrollees by 3.7 percentage. The external commercial market savings amount to $1.5 billion per year, which, if passed to consumers, approximates the internal cost savings of newly insured subsidized beneficiaries. If retained by insurers, it corresponds to a greater than 9.25 percentage average increase in profitability on stand-alone drug insurance. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: private insurers; public subsidization; private health insurance; subsidized population; Medicare Part D; commercial market (search for similar items in EconPapers)
JEL-codes: I10 I11 I13 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Insurers’ Negotiating Leverage and the External Effects of Medicare Part D (2011)
Working Paper: Insurers' Negotiating Leverage and the External Effects of Medicare Part D (2010)
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