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The Effects of Market Structure and Payment Rates on Private Medicare Health Plan Entry

Inquiry, Spring 2012, Vol. 49, No. 1, pp. 15-36

38 Pages Posted: 23 Nov 2011 Last revised: 18 Jul 2012

Austin Frakt

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)

Roger Feldman

University of Minnesota - Twin Cities - Department of Economics

Date Written: November 22, 2011

Abstract

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.

Keywords: Medicare, market structure, entry

JEL Classification: C2, D4, I11, L2

Suggested Citation

Frakt, Austin and Pizer, Steven D. and Feldman, Roger, The Effects of Market Structure and Payment Rates on Private Medicare Health Plan Entry (November 22, 2011). Inquiry, Spring 2012, Vol. 49, No. 1, pp. 15-36. Available at SSRN: https://ssrn.com/abstract=1963272

Austin Frakt (Contact Author)

Government of the United States of America - Department of Veterans Affairs (VA)

150 S. Huntington Ave (152H)
Boston, MA 02130
United States

Boston University - School of Medicine ( email )

Boston, MA 02118
United States

Boston University - School of Public Health ( email )

150 S. Huntington Ave (152H)
Boston, MA 02130
United States

Steven D. Pizer

Boston University - School of Public Health ( email )

150 S. Huntington Ave.
Mail Stop 152H
Boston, MA 02130
United States
857-364-6061 (Phone)
857-364-4511 (Fax)

HOME PAGE: http://www.hcfe.research.va.gov

Department of Veterans Affairs (VA)

810 Vermont Avenue NW
Washington, DC 20420
United States

Roger Feldman

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
15-205 Phillips-Wangensteen
Minneapolis, MN 55455
United States
612-624-5669 (Phone)

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