Making Competition Work for Medicare Beneficiaries

Harvard Medical School, Boston MA

Investigators

Linked publications, trials & patents

Abstract

REVISED PROJECT SUMMARY/ABSTRACT Project 1 will examine competition in the Medicare program and the prospects for improving the welfare of beneficiaries by strengthening competition. While there has been much focus in policy and research on the roles of payment and regulation in advancing the goals of the Medicare Advantage (MA) program, there has been little direct study of MA’s underlying premise – that competition can drive private plans to deliver greater value to beneficiaries at a lower cost. Importantly, our project recognizes that competition can come not only from rival MA insurers but also from the Traditional Medicare (TM) program. TM sets the bar in terms of coverage, access, and costs that MA must beat to attract enrollees. Thus, the design of TM may be a critical tool for Medicare to improve beneficiaries’ health and financial well-being across both programs. In other words, Medicare may not have to rely on direct regulation alone to ensure that MA delivers value for beneficiaries. However, longstanding gaps in TM coverage and favorable payments to MA plans have made TM increasingly less attractive, potentially limiting its influence on MA plans’ behavior. Limited competition from TM may be particularly consequential for the many beneficiaries living in areas with little insurer competition within MA. Understanding whether a more generous (competitive) TM would elicit better MA program performance is critical for improving Medicare, especially as MA’s rapid growth brings fundamental questions about program structure to the fore. In Aim 1, we will estimate the effects of TM generosity on MA plan bids, premiums, networks, and benefits, and beneficiaries’ use of care, medication use, care experiences, and health outcomes, leveraging quasi-experimental variation in Medigap premiums as our source of variation in TM generosity. In Aim 2, we will first study why the MA insurer market is so concentrated. Is this because a few insurers offer better or lower-priced products? Does beneficiary inertia in plan choice confer a major first-mover advantage? Or do beneficiaries hold strong brand preferences for other reasons such as advertising or pre-Medicare enrollment? Knowing why the MA market is so concentrated is critical to conceiving effective strategies for addressing concentration – some explanations may point to tougher antitrust enforcement while others motivate encouraging more active choice by enrollees. We will then leverage mergers and acquisitions to examine the effects of insurer competition within MA on the same outcomes as in Aim 1. In Aim 3, we will revisit Aims 1-2 to understand the differential effects of competition on relevant subpopulations. This will involve combining estimates of differential effects of competition for different groups in a given market with their geographic distribution across more vs. less competitive markets. The collective insights from these analyses, in concert with other findings from the Program Project (particularly the complementarities of Project 2), will inform the design of a Medicare program that can best achieve its objectives.