Analysis of Health Plan Competition in the Medicare Advantage Program

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Private Medicare Advantage (MA) plans continue to grow and attract new enrollees, with 17.6 million people enrolled in 2016-31 percent of all Medicare beneficiaries. Because the MA program relies on insurer competition to improve efficiency and consumer choice, there is bipartisan support for increasing its role in Medicare. Medicare Advantage, however, is vulnerable to the negative effects of highly concentrated insurance markets where little plan competition exists. According to the Department of Justice, roughly two-thirds of U.S. counties are highly concentrated markets. New policies that promote competition and minimize the adverse consequences of market concentration will be necessary for the continued growth and success of private plans in Medicare. Richard Frank and his team at Harvard will describe the competitive landscape in the MA program, diagnose the sources of breakdown in competition, and consider policy responses that might promote competition. The team will: construct an MA market-level database of plan benchmark costs and market variables for the years 2009-2016; analyze sources of market power through a literature search and empirical analysis of the MA market database; construct a simulation model that will provide impact estimates of policy changes on MA markets; and develop and assess policy options for promoting MA competition. Policymakers will gain insight into the competitive dynamics of the MA program. They will also learn about policy options for achieving greater plan competition, which in turn could lead to improved MA benefits and significant savings to Medicare beneficiaries and taxpayers.

Grant Details

Grantee Organization:
President and Fellows of Harvard College
Principal Investigator:
Richard G. Frank, Ph.D.
Award Amount:
$359,471.00
Approval Date:
April 11, 2017

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