Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage
AbstractA 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.
CitationCabral, Marika, Michael Geruso, and Neale Mahoney. 2018. "Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage." American Economic Review, 108 (8): 2048-87. DOI: 10.1257/aer.20151362
- G22 Insurance; Insurance Companies; Actuarial Studies
- H51 National Government Expenditures and Health
- I11 Analysis of Health Care Markets
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health