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 the U.S. Medicare program. Almost a third of Medicare beneficiaries now enroll in private insurance plans through Medicare Advantage, and there is detailed administrative data available from Medicare, and recently from private insurers. The fact Medicare private plans operate in parallel to, and in competition with public fee-for-service Medicare, allows for a comparison between private and publicly administered health insurance. The large size of the Medicare program --- the federal government spends over $130 billion annually on Medicare private plans --- also makes it consequential.
The project will address three specific questions: (1) How efficient is the current Medicare managed competition system? (2) Are there program changes that would reduce taxpayer costs without making beneficiaries worse off? (3) Do private plans achieve cost savings relative to public insurance, and if so, how do they do it? To answer these questions, the PIs will use medical claims data to compare the services provided and costs associated with private and public insurance plans. They will also estimate models of health plan choice and competition between insurers, and use these models to analyze the welfare effects of private plans for enrollees, insurers and taxpayers. Findings on the operational and cost differences between private insurance plans and public insurance, and on how well market competition is functioning, will be of interest both to economists and a wider audience.
