Morning Must-Read: Marc Duggan et al.: Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program

Mark Duggan, Amanda Starc, and Boris Vabson: Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program: “In the Medicare Advantage (MA) program…

the federal government contracts with private insurers to coordinate and finance health care for more than 15 million Medicare recipients…. Additional reimbursement leads more private firms to enter this market and to an increase in the share of Medicare recipients enrolled in MA plans… [but] only about one-fifth of the additional reimbursement is passed through to consumers in the form of better coverage. A somewhat larger share accrues to private insurers in the form of higher profits and we find suggestive evidence of a large impact on advertising expenditures. Our results have implications for a key feature of the Affordable Care Act that will reduce reimbursement to MA plans by $156 billion from 2013 to 2022.