Dropped out or pushed out? Insurance market exit and provider market power in Medicare Advantage |
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| Institution: | 1. MIT Department of Economics, United States;2. Workers Compensation Research Institute, United States;1. Department of Economics and Thomas Jefferson Program in Public Policy at the College of William and Mary, Williamsburg, VA, United States;2. Department of Economics, Tufts University, Medford, MA, United States;1. Johns Hopkins University, 624 N. Broadway Room 406, Baltimore, MD 21205, United States;2. Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213, United States;3. RAND, 4570 Fifth Avenue Suite 600, Pittsburgh, PA 15213, United States;4. Harvard Medical School, 25 Shattuck Street, Boston, MA 02115, United States;5. RAND, 20 Park Plaza 9th Floor Suite 920, Boston, MA 02116, United States;6. University of Minnesota, 420 Delaware Street, Minneapolis MN 55455, United States;7. University of Southern California, 635 Downey Way, Los Angeles, CA 90089, United States;8. NBER, United States;1. MIT and NBER, United States;2. Vanderbilt University, United States |
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| Abstract: | This paper explores how provider and insurer market power affect which markets an insurer chooses to operate in. A 2011 policy change required that certain private insurance plans in Medicare form provider networks de novo; in response, insurers cancelled two-thirds of the affected plans. Using detailed data on pre-policy provider and insurer market structure, I compare markets where insurers built networks to those they exited. Overall, insurers in the most concentrated hospital and physician markets were 9 and 13 percentage points more likely to exit, respectively, than those in the least concentrated markets. Conversely, insurers with more market power were less likely to exit than those with less, and an insurer's market power had the largest effect on exit in concentrated hospital markets. These findings suggest that concentrated provider markets contribute to insurer exit and that insurers with less market power have more difficulty surviving in concentrated provider markets. |
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| Keywords: | Health economics Insurer competition Hospital competition Physician competition Medicare Medicare Advantage |
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