Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage
A central question in the debate over privatized Medicare is whether increased government payments to private Medicare Advantage (MA) plans generate lower premiums for consumers or higher profits for producers. Using difference-in-differences variation brought about by a sharp legislative change, we find that MA insurers pass through 45% of increased payments in lower premiums and an additional 9% in more generous benefits. We show that advantageous selection into MA cannot explain this incomplete pass-through. Instead, our evidence suggests that market power is important, with premium pass-through rates of 13% in the least competitive markets and 74% in the most competitive.
Published Versions
Marika Cabral & Michael Geruso & Neale Mahoney, 2018. "Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage," American Economic Review, vol 108(8), pages 2048-2087. citation courtesy of 
Related
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
