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The Star Treatment: Estimating the Impact of Star Ratings on Medicare Advantage Enrollments

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  • Michael Darden
  • Ian M. McCarthy

Abstract

The Centers for Medicare and Medicaid Services (CMS) has calculated and disseminated an overall contract quality star rating system (from one to five stars) for all Medicare Advantage (MA) contracts since 2009. In this paper, we study the effect of CMS-reported star ratings on MA plan enrollment. We formulate a discrete choice demand model for differentiated MA plans and estimate the model with market-level plan enrollment data. We identify separate enrollment effects for each star level using a regression discontinuity research design that exploits plausibly random variation around star thresholds. The results suggest that the 2009 published star ratings directed beneficiaries away from low-rated plans more than actively toward high-rated plans. When we repeat the analysis for 2010 published quality stars, we find no significant effects. We present suggestive evidence that supply-side responses to the star rating system may explain the one-time enrollment response to CMS-published quality stars.

Suggested Citation

  • Michael Darden & Ian M. McCarthy, 2015. "The Star Treatment: Estimating the Impact of Star Ratings on Medicare Advantage Enrollments," Journal of Human Resources, University of Wisconsin Press, vol. 50(4), pages 980-1008.
    • Handle: RePEc:uwp:jhriss:v:50:y:2015:i:4:p:980-1008
    Note: DOI: 10.3368/jhr.50.4.980
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    Cited by:

    1. Michele Fioretti & Hongming Wang, 2019. "Subsidizing Inequality: Performance Pay and Risk Selection in Medicare," SciencePo Working papers Main hal-03393070, HAL.
    2. Huang, Sean Shenghsiu & Hirth, Richard A., 2016. "Quality rating and private-prices: Evidence from the nursing home industry," Journal of Health Economics, Elsevier, vol. 50(C), pages 59-70.
    3. Ian M. McCarthy & Michael Darden, 2017. "Supply-Side Responses to Public Quality Ratings: Evidence from Medicare Advantage," American Journal of Health Economics, MIT Press, vol. 3(2), pages 140-164, Spring.
    4. Haizhen Lin & Ian M. McCarthy, 2023. "Multimarket Contact in Health Insurance: Evidence from Medicare Advantage," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 212-255, March.
    5. Decarolis, Francesco & Guglielmo, Andrea, 2017. "Insurers’ response to selection risk: Evidence from Medicare enrollment reforms," Journal of Health Economics, Elsevier, vol. 56(C), pages 383-396.
    6. repec:hal:spmain:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    7. 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.
    8. repec:spo:wpecon:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    9. Jason Abaluck & Mauricio Caceres Bravo & Peter Hull: & Amanda Starc, 2021. "Mortality Effects and Choice Across Private Health Insurance Plans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1557-1610.
    10. repec:hal:wpspec:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    11. repec:hal:wpspec:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    12. Kim, Tami & Martin, Daniel, 2021. "What do consumers learn from regulator ratings? Evidence from restaurant hygiene quality disclosures," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 234-249.
    13. repec:spo:wpmain:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    14. McCarthy, Ian M., 2018. "Quality disclosure and the timing of insurers’ adjustments: Evidence from medicare advantage," Journal of Health Economics, Elsevier, vol. 61(C), pages 13-26.
    15. repec:hal:spmain:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    16. McCarthy, Ian M., 2016. "Eliminating composite bias in treatment effects estimates: Applications to quality of life assessment," Journal of Health Economics, Elsevier, vol. 50(C), pages 47-58.
    17. repec:spo:wpmain:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    18. repec:spo:wpecon:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    19. Xiaoxue Li, 2020. "Quality information disclosure and health insurance demand: evidence from VA hospital report cards," International Journal of Health Economics and Management, Springer, vol. 20(2), pages 177-199, June.

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