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The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization

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  • Katherine Baicker
  • Michael Chernew
  • Jacob Robbins
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    Abstract

    More than a quarter of Medicare beneficiaries are enrolled in Medicare Advantage, which was created in large part to improve the efficiency of health care delivery by promoting competition among private managed care plans. This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial – offsetting more than 10% of increased payments to Medicare Advantage plans.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19070.

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    Date of creation: May 2013
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    Handle: RePEc:nbr:nberwo:19070

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    1. Paul A. Heidenreich & Mark McClellan & Craig Frances & Laurence C. Baker, 2001. "The Relation Between Managed Care Market Share and the Treatment of Elderly Fee-For-Service Patients with Myocardial Infarction," NBER Working Papers, National Bureau of Economic Research, Inc 8065, National Bureau of Economic Research, Inc.
    2. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(1), pages 1-37, 02.
    3. John Cawley & Michael Chernew & Catherine McLaughlin, 2005. "HMO Participation in Medicare+Choice," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 14(3), pages 543-574, 09.
    4. 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.
    5. 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.
    6. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, Elsevier, vol. 10(4), pages 385-410.
    7. Glied, Sherry & Zivin, Joshua Graff, 2002. "How do doctors behave when some (but not all) of their patients are in managed care?," Journal of Health Economics, Elsevier, Elsevier, vol. 21(2), pages 337-353, March.
    8. Michael Chernew & Philip DeCicca & Robert Town, 2008. "Managed Care and Medical Expenditures of Medicare Beneficiaries," NBER Working Papers, National Bureau of Economic Research, Inc 13747, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Marton, James & Yelowitz, Aaron & Talbert, Jeffrey, 2014. "A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care," MPRA Paper, University Library of Munich, Germany 54105, University Library of Munich, Germany.
    2. Amitabh Chandra & Jonathan Holmes & Jonathan Skinner, 2013. "Is This Time Different? The Slowdown in Healthcare Spending," NBER Working Papers, National Bureau of Economic Research, Inc 19700, National Bureau of Economic Research, Inc.
    3. 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.

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