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|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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