Medicare Markets
This session explores the behavior of consumers and insurers in Medicare Markets in series of three empirical papers. The first paper studies responses by Medicare Advantage insurers to changes in their payment structure. The second two papers characterize hidden costs and externalities arising from the incentives embedded in the Medicare Advantage (MA) and Medigap markets. Paper (1), by Christopher Afendulis, Michael Chernew, and Mary Beth Landrum, examines whether insurers respond to the MA payment rate changes introduced by the ACA by expanding or contracting plan offerings. It also examines whether the introduction of payment bonuses for higher plan quality encouraged insurers to add plans that will receive higher scores, and/or drop plans with lower scores. Paper (2), by Michael Geruso and Timothy Layton, analyzes upcoding in MA, using changes in MA penetration over time to disentangle upcoding from selection. The paper shows that any difference in coding between Traditional Medicare and MA creates an implicit subsidy that distorts beneficiaries’ choice between the public and private options. Paper (3) describes and quantifies an externality created by Medigap insurance in which Medigap, which reduces out of pocket costs, blunts the cost sharing incentives embedded in the Traditional Medicare program. This reduction in cost sharing induces additional utilization and therefore impacts the public costs of the Medicare program.