Insurers’ Negotiating Leverage and the External Effects of Medicare Part D
By influencing the size and bargaining power of private insurers, public subsidization of private health insurance may project effects beyond the subsidized population. We test for such spillovers in Medicare Part D by analyzing how resulting increases in insurer size affected drug prices negotiated in the non-Medicare commercial market. On average, Part D lowered prices for commercial enrollees by 5.3%. The external commercial market savings amount to $2.6 billion per year, which, if passed to consumers, approximates the cost-savings of newly-insured subsidized beneficiaries. If retained by insurers, it corresponds to an 8% average increase in profitability.
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|Date of creation:||Jan 2011|
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"The Welfare Impact of Reducing Choice in Medicare Part D: A Comparison of Two Regulation Strategies,"
2010-14, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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- Claudio Lucarelli & Jeffrey Prince & Kosali Simon, 2008. "The Welfare Impact of Reducing Choice in Medicare Part D: A Comparison of Two Regulation Strategies," NBER Working Papers 14296, National Bureau of Economic Research, Inc.
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