Can Health Insurance Competition Work? Evidence from Medicare Advantage
Jay Bhattacharya (),
Vilsa Curto (),
Liran Einav () and
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Jay Bhattacharya: Stanford University
Vilsa Curto: Stanford University
Liran Einav: Stanford University
No 14-015, Discussion Papers from Stanford Institute for Economic Policy Research
We estimate the economic surplus created by Medicare Advantage 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 find that private plans have costs around 12% below fee-for-service costs, and generate around $50 in surplus on average per enrollee-month, after accounting for the disutility due to enrollees having more limited choice of providers. Taxpayers provide a large additional subsidy, and insurers capture most of the private gains. We use the model to evaluate possible program changes.
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Working Paper: Can Health Insurance Competition Work? Evidence from Medicare Advantage (2014)
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