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The Welfare Impact of Medicare HMOs

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Author Info
Town, Robert
Liu, Su
Abstract

We estimate the welfare associated with the Medicare HMO program, now known as Medicare+Choice (M+C). We find that the creation of the M+C program resulted in approximately $15.6 billion in consumer surplus and $52 billion in profits from 1993 to 2000 (in 2000 dollars). This program most likely generated significant net social welfare. However, we find that consumer surplus is geographically unevenly distributed. Prescription drug coverage accounts for approximately 45% of the estimated consumer surplus for 2000. Consumer surplus increases in the number of plans in a county, and most of the increase in welfare is due to increased premium competition. Copyright 2003 by the RAND Corporation.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 34 (2003)
Issue (Month): 4 (Winter)
Pages: 719-36
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Handle: RePEc:rje:randje:v:34:y:2003:i:4:p:719-36

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  1. Steven Pizer & Austin Frakt & Roger Feldman, 2009. "Nothing for something? Estimating cost and value for beneficiaries from recent medicare spending increases on HMO payments and drug benefits," International Journal of Health Care Finance and Economics, Springer, vol. 9(1), pages 59-81, March. [Downloadable!] (restricted)
  2. Gautam Gowrisankaran & Robert J. Town, 2004. "Managed Care, Drug Benefits and Mortality: An Analysis of the Elderly," NBER Working Papers 10204, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Shiko Maruyama, 2006. "Welfare Analysis Incorporating a Structural Entry-Exit Model: A Case Study of Medicare HMOs," Hi-Stat Discussion Paper Series d06-166, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  4. Anne E. Hall, 2007. "The value of Medicare managed care plans and their prescription drug benefits," Finance and Economics Discussion Series 2007-19, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  5. Leemore Dafny & David Dranove, 2005. "Do Report Cards Tell Consumers Anything They Don't Already Know? The Case of Medicare HMOs," NBER Working Papers 11420, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Helen Levy & David Weir, 2009. "Take-Up of Medicare Part D: Results from the Health and Retirement Study," NBER Working Papers 14692, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Shiko Maruyama, 2008. "Measuring the Welfare Effect of Entry in Differentiated Product Markets: The Case of Medicare HMOs," Discussion Papers 2008-01, School of Economics, The University of New South Wales. [Downloadable!]
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