The Effects of Market Structure and Payment Rates on Private Medicare Health Plan Entry
Government of the United States of America - Department of Veterans Affairs (VA); Boston University - School of Medicine; Boston University - School of Public Health
Steven D. Pizer
Boston University - School of Public Health; Department of Veterans Affairs (VA)
University of Minnesota - Twin Cities - Department of Economics
November 22, 2011
Inquiry, Spring 2012, Vol. 49, No. 1, pp. 15-36
Private insurance firms participating in Medicare can offer up to three principal plan types: coordinated care plans (CCPs), prescription drug plans (PDPs), and private fee for service (PFFS) plans. Firms can make entry and marketing decisions separately across plan types and geographic regions. We estimate firm-level models of Medicare private-plan entry using data from 2007-2009. Our models include a measure of market structure and separately identify CCP, PDP, and PFFS entry. We find evidence that entry barriers associated with CCP market concentration affect all three product types. We also find evidence of cross-product competition and common cost or demand factors that make entry with certain product combinations more likely. We predict that market presence of CCPs and PFFS plans will decrease and that of PDPs will increase in response to payment reductions included in the new health reform law.
Number of Pages in PDF File: 38
Keywords: Medicare, market structure, entry
JEL Classification: C2, D4, I11, L2
Date posted: November 23, 2011 ; Last revised: July 18, 2012
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