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The Comparative Advantage of Medicare Advantage

Author

Listed:
  • Joseph P. Newhouse

    () (Harvard Kennedy School; Department of Health Care Policy, Harvard Medical School; Department of Health Policy and Management, Harvard T. H. Chan School of Public Health; NBER)

  • Mary Beth Landrum

    (Department of Health Care Policy, Harvard Medical School)

  • Mary Price

    (Mongan Institute Health Policy Center, Massachusetts General Hospital)

  • J. Michael McWilliams

    (Department of Health Care Policy, Harvard Medical School)

  • John Hsu

    (Mongan Institute Health Policy Center, Massachusetts General Hospital; Department of Medicine, Harvard Medical School; Department of Health Care Policy, Harvard Medical School)

  • Thomas G. McGuire

    (Department of Health Care Policy, Harvard Medical School; NBER)

Abstract

We ascertain the degree of service-level selection in Medicare Advantage (MA) using individual-level data on the 100 most frequent hierarchical coexisting conditions (HCCs) or combination of HCCs from two national insurers in 2012–13. We find differences in the distribution of beneficiaries across HCCs between traditional Medicare (TM) and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA. Among those with an HCC code, absolute differences between MA and TM shares of beneficiaries are small, consistent with little service-level selection. Variation in margins of hierarchical coexisting conditions (HCCs) does not predict differences between an HCC's share of Medicare Advantage (MA) and traditional Medicare (TM) enrollees, although one cannot a priori sign a relationship between margin and service-level selection. Margins are positively associated with the importance of post-acute care in the HCC. Margins among common chronic disease classes amenable to medical management and typically managed by primary care physicians are larger than among diseases typically managed by specialists. These margin differences by disease are robust against a test for coding effects and suggest that the average technical efficiency of MA relative to TM may vary by diagnosis. If so, service-level selection on the basis of relative technical efficiency could be welfare enhancing.

Suggested Citation

  • Joseph P. Newhouse & Mary Beth Landrum & Mary Price & J. Michael McWilliams & John Hsu & Thomas G. McGuire, 2019. "The Comparative Advantage of Medicare Advantage," American Journal of Health Economics, MIT Press, vol. 5(2), pages 281-301, Spring.
  • Handle: RePEc:tpr:amjhec:v:5:y:2019:i:2:p:281-301
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    References listed on IDEAS

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    More about this item

    Keywords

    selection; service selection; Medicare Advantage;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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