Can Health Insurance Competition Work? Evidence from Medicare Advantage

Vilsa Curto, Liran Einav, Jonathan Levin and Jay Bhattacharya

Journal of Political Economy, 2021, vol. 129, issue 2, 570 - 606

Abstract: We estimate the economic surplus created by the Medicare Advantage program under its reformed competitive bidding rules. We use data on the universe of Medicare beneficiaries and develop a model of plan bidding that accounts for both market power and risk selection. We estimate that the Medicare Advantage program generates substantial surplus to participants (of $217 per enrollee-month), but that approximately two-thirds of this surplus is captured by insurers. We use the model to evaluate the impact of possible program changes, including changes that could increase competition and lead to lower profits and higher consumer surplus without raising taxpayer costs.

Date: 2021
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Related works:
Working Paper: Can Health Insurance Competition Work? Evidence from Medicare Advantage (2014)
Working Paper: Can Health Insurance Competition Work? Evidence from Medicare Advantage (2014)
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