Plan-provider integration, premiums, and quality in the Medicare Advantage market

Abstract

Objective: To investigate how integration between Medicare Advantage plans and health care providers is related to plan premiums and quality ratings.

Data source: We used public data from the Centers for Medicare and Medicaid Services (CMS) and the Area Resource File and private data from one large insurer. Premiums and quality ratings are from 2009 CMS administrative files and some control variables are historical.

Study design: We estimated ordinary least-squares models for premiums and plan quality ratings, with state fixed effects and firm random effects. The key independent variable was an indicator of plan-provider integration.

Data collection: With the exception of Medigap premium data, all data were publicly available. We ascertained plan-provider integration through examination of plans' websites and governance documents.

Principal findings: We found that integrated plan-providers charge higher premiums, controlling for quality. Such plans also have higher quality ratings. We found no evidence that integration is associated with more generous benefits.

Conclusions: Current policy encourages plan-provider integration, although potential effects on health insurance products and markets are uncertain. Policy makers and regulators may want to closely monitor changes in premiums and quality after integration and consider whether quality improvement (if any) justifies premium increases (if they occur).

Keywords: Medicare; health care; health economics; industrial organization.