The Efficiency Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits

41 Pages Posted: 19 Oct 2015 Last revised: 27 Feb 2022

See all articles by Mark Duggan

Mark Duggan

Stanford University - Department of Economics

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Boris Vabson

Harvard University - Department of Health Care Policy

Date Written: October 2015

Abstract

There is considerable controversy over the use of private insurers to deliver public health insurance benefits. We investigate the efficiency consequences of patients enrolling in Medicare Advantage (MA), private managed care organizations that compete with the traditional fee-for-service Medicare program. We use exogenous shocks to MA enrollment arising from plan exits from New York counties in the early 2000s, and utilize unique data that links hospital inpatient utilization to Medicare enrollment records. We find that individuals who were forced out of MA plans due to plan exit saw very large increases in hospital utilization. These increases appear to arise through plans both limiting access to nearby hospitals and reducing elective admissions, yet they are not associated with any measurable reduction in hospital quality or patient mortality.

Suggested Citation

Duggan, Mark and Gruber, Jonathan and Vabson, Boris, The Efficiency Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits (October 2015). NBER Working Paper No. w21650, Available at SSRN: https://ssrn.com/abstract=2675923

Mark Duggan (Contact Author)

Stanford University - Department of Economics ( email )

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Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Boris Vabson

Harvard University - Department of Health Care Policy ( email )

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Boston, MA 02115
United States

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