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Healthcare Spending and Utilization in Public and Private Medicare

Listed author(s):
  • Vilsa Curto
  • Liran Einav
  • Amy Finkelstein
  • Jonathan D. Levin
  • Jay Bhattacharya

We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare (TM) in the same county with the same risk score. Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care, with similar reductions for "high value" and "low value" care. Spending differences primarily reflect differences in healthcare utilization; spending per encounter and hospital payments per admission are very similar in MA and TM. Geographic variation in MA spending is about 20 percent higher than in TM, but geographic variation in hospital prices is about 20 percent lower. We present evidence consistent with MA plans encouraging substitution to less expensive care, such as primary rather than specialist care, and outpatient rather than inpatient surgery, and with employing various types of utilization management. Some of the overall spending differences between MA and TM may be driven by selection on unobservables, and we report a range of estimates of this selection effect using mortality outcomes to proxy for selection.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23090.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23090
Note: AG HC IO PE
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