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Does Competition Among Medicare Advantage Plans Matter?: An Empirical Analysis of the Effects of Local Competition in a Regulated Environment

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  • Abe Dunn

    (Economist, Antitrust Division, U.S. Department of Justice, Washington, DC 20530)

Abstract

The regulatory oversight of the private Medicare Advantage (MA) program makes the role of competition in this market unclear. This paper empirically examines the impact of competition by measuring the effects of changes in market structure on enrollment. The study examines competition in local geographic markets using county-level enrollment data from 2001-07. I find that an increase in the number of competitors results in an increase in the number of enrollees served ­ consistent with competition motivating firms to provide more generous benefits. Competition also results in an increase in product proliferation, which highlights a dimension of competition not previously examined. Overall, the results are similar to what one might expect in an unregulated environment, suggesting that there are benefits from competition that are not realized by regulation alone.

Suggested Citation

  • Abe Dunn, 2009. "Does Competition Among Medicare Advantage Plans Matter?: An Empirical Analysis of the Effects of Local Competition in a Regulated Environment," EAG Discussions Papers 200905, Department of Justice, Antitrust Division.
    • Handle: RePEc:doj:eagpap:200905
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    File URL: https://www.justice.gov/atr/public/eag/248399.pdf
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    References listed on IDEAS

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    1. Dunn, Abe, 2010. "The value of coverage in the medicare advantage insurance market," Journal of Health Economics, Elsevier, vol. 29(6), pages 839-855, December.
    2. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
    3. Wholey, Douglas & Feldman, Roger & Christianson, Jon B., 1995. "The effect of market structure on HMO premiums," Journal of Health Economics, Elsevier, vol. 14(1), pages 81-105, May.
    4. Jean Marie Abraham & Martin Gaynor & William B. Vogt, 2007. "Entry And Competition In Local Hospital Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 265-288, June.
    5. Town, Robert & Liu, Su, 2003. "The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 719-736, Winter.
    6. Evans, William N & Froeb, Luke M & Werden, Gregory J, 1993. "Endogeneity in the Concentration-Price Relationship: Causes, Consequences, and Cures," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 431-438, December.
    7. repec:mpr:mprres:5097 is not listed on IDEAS
    8. 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.
    9. Leemore Dafny & David Dranove, 2008. "Do report cards tell consumers anything they don't already know? The case of Medicare HMOs," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 790-821, September.
    10. David Dranove & Anne Gron & Michael J. Mazzeo, 2003. "Differentiation and Competition in HMO Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 433-454, December.
    11. Davis, Peter, 2005. "The Effect of Local Competition on Admission Prices in the U.S. Motion Picture Exhibition Market," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 677-708, October.
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    Cited by:

    1. Ken Heyer & Nicholas Hill, 2008. "The Year in Review: Economics at the Antitrust Division, 2007–2008," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(3), pages 247-262, November.

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