Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
Medicare Advantage? The Effects of Medicare Managed Care on Quality, Access, and Disparities in Medicare
Recent policy reforms, notably the 1997 Balanced Budget Act (BBA), the Benefit Improvement and Protection Act (BIPA) of 2000 and the 2003 Medicare Modernization Act (MMA) have sought both to expand the role of managed care in Medicare, despite limited information about quality of care provided by Medicare managed care (MMC) plans. Although policymakers believed that MMC could reduce costs without affecting quality, theory predicts that managed care could improve or reduce quality of care. Existing literature indicates quality problems under MMC, but this literature is based on limited data and is largely unable to address the adverse selection problem caused by healthier beneficiaries selecting into MMC.
This paper uses the State Inpatient Data, a unique inpatient hospitalization dataset from the Healthcare Cost and Utilization Project containing all instate inpatient hospitalizations for Medicare managed care and Fee-for-Service (FFS) enrollees residing in four states (Arizona, Florida, New Jersey and New York) from 1999 - 2004. Rates of potentially preventable hospitalizations provide information about the quality of outpatient care provided. Referral-sensitive procedures indicate access to elective procedures and referring specialists in the outpatient setting. Disparities in rates of procedures between Blacks and Whites indicate the effects of MMC on health disparities. Congressional payment policy to Medicare managed care plans creates random variation in payment rates across counties and over time. This natural experiment provides a way to correct for non-random selection into MMC.
Most of the observed differences in hospitalization rates can be explained by positive selection into managed care- MMC enrollees experience fewer hospitalizations than other enrollees and fewer comorbid conditions conditional on admission. There is an additional protective effect of MMC which accounts for between 20 and 34 fewer potentially preventable hospitalizations per 1,000 enrollees, with many of the gains resulting from prevention of acute illness rather than chronic condition management. No significant effect of MMC enrollment is found on elective procedures. Managed care enrollment partially mitigates racial disparities in access to elective procedures between Blacks and Whites, but may exacerbate disparities in preventable admissions. County level fixed effects models use changes in MMC penetration over time to show that there is no global effect of MMC penetration on quality or access to care for Medicare beneficiaries. This suggests that observed gains for MMC enrollees are either tempered by negative spillovers for those remaining in FFS or result from further unobserved positive selection. Although health insurance typically transfers resources from healthy enrollees to sick, I show that MMC payment policy instead causes a transfer towards healthy enrollees selecting MMC within the Medicare program.