Health Care Spending and Utilization in Public and Private Medicare

Health Care Spending and Utilization in Public and Private Medicare

By
Vilsa Curto, Liran Einav, Amy Finkelstein, Jonathan Levin, Jay Bhattacharya
American Economic Journal: Applied Economics. April
2019, Vol. 11, Issue 2, Pages 303-332

We compare health care 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 health care spending. Adjusting for enrollee mix, health care 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 health care utilization, with similar reductions for “high-value” and “low-value” care, rather than health care prices. We present evidence consistent with MA plans encouraging substitution to less expensive care and engaging in utilization management.