The Effects of Market Structure and Payment Rate on the Entry of Private Health Plans into the Medicare Market
Open Access
- 1 February 2012
- journal article
- research article
- Published by SAGE Publications in INQUIRY: The Journal of Health Care Organization, Provision, and Financing
- Vol. 49 (1), 15-36
- https://doi.org/10.5034/inquiryjrnl_49.01.03
Abstract
Private insurance firms participating in Medicare can offer up to three principal plan types: coordinated care plans (CCPs), prescription drug plans (PDPs), and private fee-for-service (PFFS) plans. Firms can make entry and marketing decisions separately across plan types and geographic regions. In this study, we estimate firm-level models of Medicare private plan entry using data from the years 2007 to 2009. Our models include a measure of market structure and separately identify CCP, PDP, and PFFS entry. We find evidence that entry barriers associated with CCP market concentration affect all three product types. We also find evidence of cross-product competition and common cost or demand factors that make entry with certain product combinations more likely. We predict that the market presence of CCPs and PFFS plans will decrease and that of PDPs will increase in response to payment reductions included in the new health reform law.Keywords
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