Insurers' Negotiating Leverage and the External Effects of Medicare Part D
AbstractPublic financing of private health insurance may generate external effects beyond the subsidized population, by influencing the size and bargaining power of health insurers. We test for this external effect in the context of Medicare Part D. We analyze how Part D-related insurer size increases impacted retail drug prices negotiated by insurers for their non-Part D commercial market. On average, Part D lowered retail prices for commercial insureds by 5.8% to 8.5%. The cost-savings to the commercial market amount to $3bn per year, which approximates the total annual savings experienced by Part D beneficiaries who previously lacked drug coverage.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16251.
Date of creation: Aug 2010
Date of revision:
Publication status: published as “Insurers' Negotiating Leverage and the External Effect of Medicare Part D” forthcoming, Review of Economics and Statistics (w/ Darius Lakdawalla)
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Other versions of this item:
- Wesley Yin & Darius Lakdawalla, 2011. "Insurers’ Negotiating Leverage and the External Effects of Medicare Part D," Boston University - Department of Economics - Working Papers Series WP2011-065, Boston University - Department of Economics.
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-HEA-2010-08-14 (Health Economics)
- NEP-IAS-2010-08-14 (Insurance Economics)
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