Measuring the Return on Government Spending on the Medicare Managed Care Program
I estimate the welfare provided to beneficiaries by the Medicare managed care program, and its net costs, for the years 1999-2002. I measure beneficiary welfare with a nested logit model of demand for Medicare HMO plans using detailed data on plan benefits. From this, I find that total beneficiary welfare provided by the program over the four-year period is about $61 billion (2000 $). I also use data on and estimates of the favorable selection enjoyed by Medicare HMOs from the research literature to estimate net costs of the program, which range from $21 billion to $31 billion (2000 $). Estimated net beneficiary welfare of the program therefore ranges from $30 billion to $40 billion and the estimated return on government spending ranges from 96 percent to 186 percent. Even though managed care plans are overpaid by Medicare, the program still enjoys a substantial return due to the popularity of its offerings.
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Volume (Year): 11 (2011)
Issue (Month): 2 (January)
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References listed on IDEAS
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- 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.
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- repec:mpr:mprres:3849 is not listed on IDEAS
- Jason Brown & Mark Duggan & Ilyana Kuziemko & William Woolston, 2011.
"How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program,"
NBER Working Papers
16977, National Bureau of Economic Research, Inc.
- Jason Brown & Mark Duggan & Ilyana Kuziemko & William Woolston, 2011. "How does Risk-selection Respond to Risk-adjustment? Evidence from the Medicare Advantage Program," Discussion Papers 10-024, Stanford Institute for Economic Policy Research.
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