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Does Part D abet advantageous selection in Medicare Advantage?

Author

Listed:
  • Han, Tony
  • Lavetti, Kurt

Abstract

The use of risk-adjustment formulae in setting payments to Medicare Advantage (MA) plans reduces the potential for advantageous selection on factors included in the formulae, but can theoretically worsen overall selection if plans are able to target beneficiaries based on excluded factors. Since MA medical risk-adjustment excludes prescription drug utilization, demand for drugs can be exploited by plans to induce advantageous selection. We show evidence that the introduction of Medicare Part D provided a mechanism for MA plans to increase selection, and that consumers responded, increasing MA market shares among beneficiaries taking drugs associated with the strongest advantageous selection incentives. For the average Medicare beneficiary in our sample, we estimate that this change in advantageous selection following the introduction of Medicare Part D increased the probability of enrolling in an MA plan by about 7.1%.

Suggested Citation

  • Han, Tony & Lavetti, Kurt, 2017. "Does Part D abet advantageous selection in Medicare Advantage?," Journal of Health Economics, Elsevier, vol. 56(C), pages 368-382.
    • Handle: RePEc:eee:jhecon:v:56:y:2017:i:c:p:368-382
    DOI: 10.1016/j.jhealeco.2017.06.007
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    Citations

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    Cited by:

    1. Peter Paul Klein & Richard van Kleef & Josefa Henriquez & Francesco Paolucci, 2023. "The interplay between risk adjustment and risk rating in voluntary health insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 59-91, March.
    2. Michele Fioretti & Hongming Wang, 2023. "Performance Pay in Insurance Markets: Evidence from Medicare," The Review of Economics and Statistics, MIT Press, vol. 105(5), pages 1128-1144, September.
    3. A. A. Withagen-Koster & R. C. Kleef & F. Eijkenaar, 2020. "Incorporating self-reported health measures in risk equalization through constrained regression," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(4), pages 513-528, June.
    4. Anna Jędrzychowska, 2022. "A Bridge Life Insurance for Households—Diagnosis and Motives," Risks, MDPI, vol. 10(4), pages 1-21, April.
    5. Savannah L. Bergquist & Timothy J. Layton & Thomas G. McGuire & Sherri Rose, 2018. "Intervening on the Data to Improve the Performance of Health Plan Payment Methods," NBER Working Papers 24491, National Bureau of Economic Research, Inc.
    6. repec:hal:spmain:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    7. Richard C. van Kleef & René C. J. A. van Vliet, 2022. "How to deal with persistently low/high spenders in health plan payment systems?," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 784-805, May.
    8. repec:spo:wpecon:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    9. repec:hal:wpspec:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    10. Jing Jian Xiao & Chunsheng Tao, 2020. "Consumer finance/household finance: the definition and scope," China Finance Review International, Emerald Group Publishing Limited, vol. 11(1), pages 1-25, June.
    11. Moiz Bhai & Danny Hughes, 2024. "Estimating Self-Selection in Medicare Advantage," Working Papers 2024-009, Human Capital and Economic Opportunity Working Group.
    12. Bergquist, Savannah L. & Layton, Timothy J. & McGuire, Thomas G. & Rose, Sherri, 2019. "Data transformations to improve the performance of health plan payment methods," Journal of Health Economics, Elsevier, vol. 66(C), pages 195-207.
    13. repec:spo:wpmain:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS

    More about this item

    Keywords

    Health insurance selection; Public provision of private insurance; Medicare Advantage;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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