Estimating Self-Selection in Medicare Advantage

We explore the fundamental question of selection in Medicare Advantage by exploiting quasi-experimental variation from the Initial Enrollment Period for Medicare eligibility to evaluate and describe participation in Medicare Advantage. Using a novel source of administrative claims data between 2007 and 2017, we investigate the transition from commercial insurance to Medicare Advantage for a comprehensive subset of commercially insured enrollees. We use the sharp cutoff at age 65 for one of the largest commercial and Medicare Advantage insurers in the United States to implement a “positive correlation†test. Our findings using baseline characteristics at age 64 reveal that enrollees in Medicare Advantage are advantageously selected on multiple measures of health status such as Charlson Comorbidity Index (CCI) scores, out-of-pocket costs, utilization, while differentially selected on demographic characteristics. Initial Medicare Advantage enrollees are also likely to join from capitated commercial plans such as Health Maintenance Organizations (HMOs), and commercial plan type is the largest explanatory factor for participation. Subsequent analyses reveal non-linearity in selection with enrollees with largest out-of-pocket costs and highest utilization opting out of Medicare Advantage. Finally, we examine the evolution of selection in Medicare Advantage over time with a focus on the passage of the Affordable Care Act where we find no effects in influencing selection.