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Healthcare Spending and Utilization in Public and Private Medicare

Author

Listed:
  • Vilsa Curto
  • Liran Einav
  • Amy Finkelstein
  • Jonathan D. Levin
  • Jay Bhattacharya

Abstract

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.

Suggested Citation

  • Vilsa Curto & Liran Einav & Amy Finkelstein & Jonathan D. Levin & Jay Bhattacharya, 2017. "Healthcare Spending and Utilization in Public and Private Medicare," NBER Working Papers 23090, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23090
    Note: AG HC IO PE
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    Cited by:

    1. repec:aea:jecper:v:31:y:2017:i:4:p:3-22 is not listed on IDEAS
    2. David Dranove & Christopher Ody & Amanda Starc, 2017. "A Dose of Managed Care: Controlling Drug Spending in Medicaid," NBER Working Papers 23956, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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