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Health Insurance Competition and Healthcare Costs

Jul 2015 to Jun 2018

Researcher(s)

Sponsor(s)

NSF

Project Goal:


The goal of this project is to investigate how efficiently these markets can operate, and how well competition between private insurers can work. We focus on Medicare, as almost a third of beneficiaries now enroll in private plans through Medicare Advantage, and there is detailed administrative data available from Medicare and from private insurers. The project will address three questions:
(1) How efficient is the current managed competition system being operated by Medicare?
(2) Are there alternative market designs that would reduce taxpayer costs without making beneficiaries worse off?
(3) Do private plans have cost advantages relative to public insurance, and if so, how do these savings arise?
To answer these questions, we aim to combine theoretical frameworks that enable econometric measurement with rich administrative data.
 

Intellectual Merit:


New Research Project for Website - thanks KS Khan, Shehnaz Wed 7/8/2015 3:48 PM Inbox To: Shor, Anne; Flag for follow up. Completed on Thursday, August 27, 2015. Title: Health Insurance Competition and Healthcare Costs PI(s): Jay Bhattacharya, Liran Einav, Jonathan Levin Sponsor: NSF Dates: 7/1/2015 – 6/30/2018 Program: Health Economics Abstract Health Insurance Competition and Healthcare Costs Regulated markets for health insurance are increasingly important in the United States. The goal of this project is to investigate how efficiently these markets can operate, and how well competition between private insurers can work. We focus on Medicare, as almost a third of beneficiaries now enroll in private plans through Medicare Advantage, and there is detailed administrative data available from Medicare and from private insurers. The project will address three questions: (1) How efficient is the current managed competition system being operated by Medicare? (2) Are there alternative market designs that would reduce taxpayer costs without making beneficiaries worse off? (3) Do private plans have cost advantages relative to public insurance, and if so, how do these savings arise? To answer these questions, we aim to combine theoretical frameworks that enable econometric measurement with rich administrative data. Intellectual Merit: Economists have debated the efficacy of health insurance markets for many years. Reforms to the Medicare Advantage program have brought it much closer in line with the mechanisms historically advocated by economists. There is also a benchmark for comparison because it operates in parallel to public Medicare insurance. As a result, there is an opportunity to evaluate the efficiency of private market insurance competition, and also the operational and cost differences between private insurance plans and public insurance. The findings will contribute to broad literatures on both health care competition, and the privatization of public programs.

 

Broader Impacts:


The federal government spends over $130 billion annually on Medicare private plans. There is limited evidence on how the care received in private plans differs from public insurance, and whether it leads to differences in health outcomes. Over the last several years, taxpayer expenditures have been higher for private plan enrollees, by around eleven percent after accounting for health and geographical differences. Better understanding the differences between private and public health insurance, and how market design affects competition between private plans, which in turn determines government payments, may therefore have a substantial social payoff.