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Managed Care and Medical Expenditures of Medicare Beneficiaries

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  • Michael Chernew
  • Philip DeCicca
  • Robert Town

Abstract

This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service enrollees. We find that increasing penetration leads to reduced health care spending on fee-for-service beneficiaries. In particular, a one percentage point increase in Medicare HMO penetration reduces such spending by .9 percent. We estimate similar models for various measures of health care utilization and find penetration-induced reductions, consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13747.

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Date of creation: Jan 2008
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Publication status: published as Chernew, Michael & DeCicca, Philip & Town, Robert, 2008. "Managed care and medical expenditures of Medicare beneficiaries," Journal of Health Economics, Elsevier, vol. 27(6), pages 1451-1461, December.
Handle: RePEc:nbr:nberwo:13747

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References

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  1. Town, Robert & Liu, Su, 2003. " The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 719-36, Winter.
  2. Michelle M. Mello & Sally C. Stearns & Edward C. Norton, 2002. "Do Medicare HMOs still reduce health services use after controlling for selection bias?," Health Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 323-340.
  3. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, Elsevier, vol. 16(4), pages 453-481, August.
  4. Zwanziger, Jack & Melnick, Glenn A., 1988. "The effects of hospital competition and the Medicare PPS program on hospital cost behavior in California," Journal of Health Economics, Elsevier, Elsevier, vol. 7(4), pages 301-320, December.
  5. Hill, Steven C. & Wolfe, Barbara L., 1997. "Testing the HMO competitive strategy: An analysis of its impact on medical care resources," Journal of Health Economics, Elsevier, Elsevier, vol. 16(3), pages 261-286, June.
  6. John Cawley & Michael Chernew & Catherine McLaughlin, 2002. "CMS Payments Necessary to Support HMO Participation in Medicare Managed Care," NBER Chapters, in: Frontiers in Health Policy Research, Volume 5, pages 1-26 National Bureau of Economic Research, Inc.
  7. 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.
  8. Baker, Laurence C & McClellan, Mark B, 2001. "Managed Care, Health Care Quality, and Regulation," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 30(2), pages 715-41, June.
  9. Cao, Zhun & McGuire, Thomas G., 2003. "Service-level selection by HMOs in Medicare," Journal of Health Economics, Elsevier, Elsevier, vol. 22(6), pages 915-931, November.
  10. David M. Cutler & Louise Sheiner, 1998. "Managed Care and the Growth of Medical Expenditures," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 77-116 National Bureau of Economic Research, Inc.
  11. Baker, Laurence C & Corts, Kenneth S, 1996. "HMO Penetration and the Cost of Health Care: Market Discipline or Market Segmentation?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 389-94, May.
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Cited by:
  1. Abe Dunn, 2010. "The Value of Coverage in the Medicare Advantage Insurance Market," BEA Working Papers, Bureau of Economic Analysis 0061, Bureau of Economic Analysis.
  2. Song, Zirui & Landrum, Mary Beth & Chernew, Michael E., 2013. "Competitive bidding in Medicare Advantage: Effect of benchmark changes on plan bids," Journal of Health Economics, Elsevier, Elsevier, vol. 32(6), pages 1301-1312.
  3. Katherine Baicker & Michael Chernew & Jacob Robbins, 2013. "The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization," NBER Working Papers 19070, National Bureau of Economic Research, Inc.
  4. Baicker, Katherine & Chernew, Michael E. & Robbins, Jacob A., 2013. "The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization," Journal of Health Economics, Elsevier, Elsevier, vol. 32(6), pages 1289-1300.

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