Health Care Spending and Utilization in Public and Private Medicare

Vilsa Curto; Liran Einav; Amy Finkelstein; Jonathan Levin; Jay Bhattacharya

doi:10.1257/app.20170295

Health Care Spending and Utilization in Public and Private Medicare

Am Econ J Appl Econ. 2019 Apr;11(2):302-332. doi: 10.1257/app.20170295.

Authors

Vilsa Curto¹, Liran Einav¹, Amy Finkelstein¹, Jonathan Levin¹, Jay Bhattacharya¹

Affiliation

¹ Curto: Department of Health Policy and Management, T.H. Chan School of Public Health, Harvard University, 677 Huntington Avenue, Boston, MA 02115 (vcurto@hsph.harvard.edu); Einav: Department of Economics, Stanford University, 579 Serra Mall, Stanford, CA 94305-6072 (leinav@stanford.edu) and NBER; Finkelstein: Department of Economics, MIT, 50 Memorial Drive, Cambrdige, MA 02142-1347 (afink@mit.edu) and NBER; Levin: Graduate School of Business, Stanford University, 655 Knight Way, Stanford, CA 94305-7298 (jdlevin@stanford.edu) and NBER; Bhattacharya: School of Medicine, Stanford University, 616 Serra Street, Stanford, CA 94305-6019 (jay@stanford.edu). We are grateful to Diego Jimenez, Andelyn Russell, Daniel Salmon, and Martina Uccioli for excellent research assistance. We thank the Editor, three anonymous referees, and numerous seminar participants for helpful comments. We gratefully acknowledge support from the NSF (SES-1527942, Bhattacharya, Einav, and Levin), the NIA (R01 AG032449, Einav and Finkelstein; R37 AG036791, Bhattacharya), and the Sloan Foundation (Bhattacharya, Einav, Finkelstein, and Levin). The authors acknowledge the assistance of the Health Care Cost Institute (HCCI) and its data contributors, Aetna, Humana, and UnitedHealthcare, in providing the claims data analyzed in this study.

Abstract

We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Adjusting for enrollee mix, healthcare spending per enrollee in MA is 9 to 30 percent lower than in traditional Medicare (TM), depending on the way we define "comparable" enrollees. Spending differences primarily reflect differences in healthcare utilization, with similar reductions for "high value" and "low value" care, rather than healthcare prices. We present evidence consistent with MA plans encouraging substitution to less expensive care and engaging in utilization management. (JEL H11, H42, H51, I11, I13).

Abstract

Grants and funding