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The Comparative Advantage of Medicare Advantage

Joseph P. Newhouse (), Mary Beth Landrum, Mary Price, J. Michael McWilliams, John Hsu and Thomas G. McGuire
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Joseph P. Newhouse: Harvard Kennedy School; Department of Health Care Policy, Harvard Medical School; Department of Health Policy and Management, Harvard T. H. Chan School of Public Health; NBER
Mary Beth Landrum: Department of Health Care Policy, Harvard Medical School
Mary Price: Mongan Institute Health Policy Center, Massachusetts General Hospital
J. Michael McWilliams: Department of Health Care Policy, Harvard Medical School
John Hsu: Mongan Institute Health Policy Center, Massachusetts General Hospital; Department of Medicine, Harvard Medical School; Department of Health Care Policy, Harvard Medical School
Thomas G. McGuire: Department of Health Care Policy, Harvard Medical School; NBER

American Journal of Health Economics, 2019, vol. 5, issue 2, 281-301

Abstract: We ascertain the degree of service-level selection in Medicare Advantage (MA) using individual-level data on the 100 most frequent hierarchical coexisting conditions (HCCs) or combination of HCCs from two national insurers in 2012–13. We find differences in the distribution of beneficiaries across HCCs between traditional Medicare (TM) and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA. Among those with an HCC code, absolute differences between MA and TM shares of beneficiaries are small, consistent with little service-level selection. Variation in margins of hierarchical coexisting conditions (HCCs) does not predict differences between an HCC's share of Medicare Advantage (MA) and traditional Medicare (TM) enrollees, although one cannot a priori sign a relationship between margin and service-level selection. Margins are positively associated with the importance of post-acute care in the HCC. Margins among common chronic disease classes amenable to medical management and typically managed by primary care physicians are larger than among diseases typically managed by specialists. These margin differences by disease are robust against a test for coding effects and suggest that the average technical efficiency of MA relative to TM may vary by diagnosis. If so, service-level selection on the basis of relative technical efficiency could be welfare enhancing.

Keywords: selection; service selection; Medicare Advantage (search for similar items in EconPapers)
JEL-codes: I11 I13 I18 (search for similar items in EconPapers)
Date: 2019
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