The Comparative Advantage of Medicare Advantage

33 Pages Posted: 16 May 2018 Last revised: 15 May 2021

See all articles by Joseph P. Newhouse

Joseph P. Newhouse

Harvard Medical School; Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Mary Beth Landrum

Harvard Medical School

Mary Price

Kaiser Permanente Division of Research

Michael McWilliams

Harvard University

John Hsu

Partners HealthCare

Thomas G. McGuire

Harvard University - Department of Health Care Policy

Date Written: February 2018

Abstract

We ascertain the degree of service-level selection in Medicare Advantage (MA) using individual level data on the 100 most frequent HCC’s or combination of HCC’s from two national insurers in 2012-2013. We find differences in the distribution of beneficiaries across HCC’s between TM and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA. Among those with an HCC code, absolute differences between MA and TM shares of beneficiaries are small, consistent with little service-level selection. Variation in HCC margins does not predict differences between an HCC’s share of MA and TM enrollees, although one cannot a priori sign a relationship between margin and service-level selection. Margins are negatively associated with the importance of post-acute care in the HCC. Margins among common chronic disease classes amenable to medical management and typically managed by primary care physicians are larger than among diseases typically managed by specialists. These margin differences by disease are robust against a test for coding effects and suggest that the average technical efficiency of MA relative to TM may vary by diagnosis. If so, service-level selection on the basis of relative technical efficiency could be welfare enhancing.

Suggested Citation

Newhouse, Joseph P. and Landrum, Mary Beth and Price, Mary and McWilliams, Michael and Hsu, John and McGuire, Thomas G., The Comparative Advantage of Medicare Advantage (February 2018). NBER Working Paper No. w24289, Available at SSRN: https://ssrn.com/abstract=3177938

Joseph P. Newhouse (Contact Author)

Harvard Medical School; Harvard Kennedy School (HKS) ( email )

Department of Health Care Policy
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Mary Beth Landrum

Harvard Medical School ( email )

Department of Health Care Policy
Boston, MA 02115
United States

Mary Price

Kaiser Permanente Division of Research ( email )

CA
United States

Michael McWilliams

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

John Hsu

Partners HealthCare ( email )

115 Fourth Ave.
Boston, MA 02114
United States

Thomas G. McGuire

Harvard University - Department of Health Care Policy ( email )

180 Longwood Ave
Boston, MA 02115
United States

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