Unbiased Analysis of Today's Healthcare Issues

Impact of Medicare Advantage on Hospital Admissions

Written By: Jason Shafrin - Apr• 27•16

Do patients who enroll in Medicare Advantage go to the hospital less frequently? The answer is yes. However, this fact may not be causal. Patients who enroll in Medicare Advantage are generally younger and healthier than patients who enroll in Medicare’s fee-for-service (FFS) program.

A paper by Duggan, Gruber and Vabson (2016) uses a novel approach to identify the causal effect. According to the NBER Digest, the authors:

examine the change in health care utilization by MA beneficiaries after they switch to traditional Medicare because their private insurer has exited the market. By focusing on cases where there are no other MA providers in the county, the authors ensure that the change in MA status is unrelated to the individual’s health or other characteristics.

Using this approach for hospitals in New York State, the authors find that…

MA enrollees who are forced to switch to traditional Medicare due to MA exit experience an increase of 0.11 hospital admissions per capita, which represents a 60 percent increase relative to the mean of 0.18 admissions. This increase in hospitalizations is accompanied by a 48 percent increase in total days spent in the hospital, a 33 percent increase in the number of procedures, and a 53 percent increase in hospital charges.

What other explanations are there for this result? Is this increase in hospitalizations a result of pent-up demand that was constrained by MA utilization restrictions? If so, there should have been only a short-term increase in hospital admissions, when in fact the increase persisted over time.

The authors do not find that MA enrollees face higher cost-sharing than traditional Medicare beneficiaries. This makes sense as MA plans that bid below the benchmark are able to reduce patient cost sharing.

The authors hypothesize that MA plans may restrict patients to hospitals that involve considerably longer travel or that MA plans more tightly restrict elective and non-urgent hospitalizations. However, quality of care and patient mortality are similar when patients are in MA or FFS plans.

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