Competition in the Medicare Advantage program may be helping to hold down the cost of all U.S. hospital care.
Katherine Baicker, a health economist at Harvard University, and two colleagues at Harvard — Michael Chernew and Jacob Robbins — make that argument in a copyrighted working paper on Medicare managed care “spillover effects” published behind a paywall at the National Bureau of Economic Research.
The researchers started with Medicare spending data from the Medicare Rate Book, plan enrollment data from the Centers for Medicare & Medicaid Services (CMS), state inpatient spending data from the Agency for Healthcare Research and Quality’s Healthcare Cost and Utilization Project’s State Inpatient Databases, and county-level economic and demographic data from the Health Resources and Services Administration’s Area Resource File.
The researchers looked at how increases in Medicare Advantage penetration correlate with spending at the hospital level and county level on care for traditional Medicare plan enrollees and commercial health plan enrollees. They tried to adjust the data for differences in counties’ economic and demographic differences.
The researchers found that a 10 percent increase in the Medicare Advantage penetration rate in a county correlated with a 2.4 percent drop in hospitalization costs for all patients.