Insurers' Negotiating Leverage and the External Effects of Medicare Part D
Public financing of private health insurance may generate external effects beyond the subsidized population, by influencing the size and bargaining power of health insurers. We test for this external effect in the context of Medicare Part D. We analyze how Part D-related insurer size increases impacted retail drug prices negotiated by insurers for their non-Part D commercial market. On average, Part D lowered retail prices for commercial insureds by 5.8% to 8.5%. The cost-savings to the commercial market amount to $3bn per year, which approximates the total annual savings experienced by Part D beneficiaries who previously lacked drug coverage.
|Date of creation:||Aug 2010|
|Date of revision:|
|Publication status:||published as “Insurers' Negotiating Leverage and the External Effect of Medicare Part D”, Review of Economics and Statistics (w/ Darius Lakdawalla) May 2015, Vol. 97, No. 2, Pages 314-331|
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- Claudio Lucarelli & Jeffrey T. Prince & Kosali Simon, 2009.
"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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