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Enter at Your Own Risk: HMO Participation and Enrollment in the MedicareRisk Market

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Listed:
  • Jean Abraham
  • Ashish Arora
  • Martin Gaynor
  • Douglas Wholey

Abstract

We examine HMO participation and enrollment in the Medicare risk market for the years 1990 to 1995. We develop a profit- maximization model of HMO behavior, which explicitly considers potential linkages between an HMO's production decision in the commercial enrollee market and its participation and production decisions in the Medicare risk market. Our results suggest that the payment rate is a primary determinant of HMO participation, while the price of a supplemental Medicare insurance policy positively affects HMO Medicare enrollment. We also find empirical support for the existence of complementarities in the joint production of an HMO's commercial and Medicare products.

Suggested Citation

  • Jean Abraham & Ashish Arora & Martin Gaynor & Douglas Wholey, 1999. "Enter at Your Own Risk: HMO Participation and Enrollment in the MedicareRisk Market," NBER Working Papers 7385, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7385
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    References listed on IDEAS

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    1. Danzon, Patricia Munch, 1982. "Hospital `profits' : The effects of reimbursement policies," Journal of Health Economics, Elsevier, vol. 1(1), pages 29-52, May.
    2. Wholey, Douglas & Feldman, Roger & Christianson, Jon B., 1995. "The effect of market structure on HMO premiums," Journal of Health Economics, Elsevier, vol. 14(1), pages 81-105, May.
    3. Given, Ruth S., 1996. "Economies of scale and scope as an explanation of merger and output diversification activities in the health maintenance organization industry," Journal of Health Economics, Elsevier, vol. 15(6), pages 685-713, December.
    4. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Theory," Econometrica, Econometric Society, vol. 52(3), pages 681-700, May.
    5. Pauly, Mark V, 1987. "Nonprofit Firms in Medical Markets," American Economic Review, American Economic Association, vol. 77(2), pages 257-262, May.
    6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    7. Wholey, Douglas & Feldman, Roger & Christianson, Jon B. & Engberg, John, 1996. "Scale and scope economies among health maintenance organizations," Journal of Health Economics, Elsevier, vol. 15(6), pages 657-684, December.
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    Cited by:

    1. Cawley John & Chernew Michael & McLaughlin Catherine, 2002. "CMS Payments Necessary to Support HMO Participation in Medicare Managed Care," Forum for Health Economics & Policy, De Gruyter, vol. 5(1), pages 1-28, January.
    2. Dunn, Abe, 2010. "The value of coverage in the medicare advantage insurance market," Journal of Health Economics, Elsevier, vol. 29(6), pages 839-855, December.

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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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