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Enter at Your Own Risk: HMO Participation and Enrollment in the Medicare Risk Market


  • Abraham, Jean, et al


We examine HMO participation and enrollment in the Medicare risk market for the years 1990 to 1995. We develop a profit-maximization model of HMO behavior, which explicitly considers potential linkages between an HMO's production decision in the commercial enrollee market and its participation and production decisions in the Medicare risk market. Our results suggest that the payment rate is a primary determinant of HMO participation, while the price of a supplemental Medicare insurance policy positively affects HMO Medicare enrollment. We also find empirical support for the existence of complementarities in the joint production of an HMO's commercial and Medicare products. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Abraham, Jean, et al, 2000. "Enter at Your Own Risk: HMO Participation and Enrollment in the Medicare Risk Market," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 385-401, July.
  • Handle: RePEc:oup:ecinqu:v:38:y:2000:i:3:p:385-401

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    References listed on IDEAS

    1. Ferguson, D G, , et al, 1991. "The Pricing of Sports Events: Do Teams Maximize Profit?," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 297-310, March.
    2. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
    3. Whitney, James D, 1993. "Bidding Till Bankrupt: Destructive Competition in Professional Team Sports," Economic Inquiry, Western Economic Association International, vol. 31(1), pages 100-115, January.
    4. Avinash Dixit, 1979. "Quality and Quantity Competition," Review of Economic Studies, Oxford University Press, vol. 46(4), pages 587-599.
    5. Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
    6. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
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    Cited by:

    1. Anne E. Hall, 2007. "The value of Medicare managed care plans and their prescription drug benefits," Finance and Economics Discussion Series 2007-19, Board of Governors of the Federal Reserve System (U.S.).
    2. Pelech, Daria, 2017. "Dropped out or pushed out? Insurance market exit and provider market power in Medicare Advantage," Journal of Health Economics, Elsevier, vol. 51(C), pages 98-112.
    3. 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.
    4. 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.

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