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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Web page: http://www.bu.edu/econ/
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2010-14, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Claudio Lucarelli & Jeffrey Prince & Kosali Simon, 2012. "The Welfare Impact Of Reducing Choice In Medicare Part D: A Comparison Of Two Regulation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1155-1177, November.
- 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.
- Gary V. Engelhardt & Jonathan Gruber, 2010. "Medicare Part D and the Financial Protection of the Elderly," NBER Working Papers 16155, National Bureau of Economic Research, Inc.
- Tasneem Chipty & Christopher M. Snyder, 1999. "The Role Of Firm Size In Bilateral Bargaining: A Study Of The Cable Television Industry," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 326-340, May.
- Jonathan D. Ketcham & Kosali Simon, 2008. "Medicare Part D's Effects on Elderly Drug Costs and Utilization," NBER Working Papers 14326, National Bureau of Economic Research, Inc.
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