International Journal of Health Care Finance and Economics

, 9:59

Nothing for something? Estimating cost and value for beneficiaries from recent medicare spending increases on HMO payments and drug benefits

Authors

    • Department of Veterans’ AffairsHealth Care Financing & Economics, VA Boston Health Care System
    • Boston University
  • Austin B. Frakt
    • Department of Veterans’ AffairsHealth Care Financing & Economics, VA Boston Health Care System
  • Roger Feldman
    • University of Minnesota
Article

DOI: 10.1007/s10754-008-9047-x

Cite this article as:
Pizer, S.D., Frakt, A.B. & Feldman, R. Int J Health Care Finance Econ (2009) 9: 59. doi:10.1007/s10754-008-9047-x

Abstract

The Medicare Modernization Act of 2003 added a new outpatient prescription drug benefit to Medicare and increased payments to HMOs. We estimate a nested logit model of plan choice to quantify the welfare benefits from these two expansion paths. We find that the addition of stand-alone prescription drug plans was welfare improving and produced nine times as much value per government dollar as the increase in payments to HMOs. In light of these results, we suggest that HMO bidding procedures should be modified to reduce payments to HMOs by about $67 billion over the next 10 years.

Keywords

MedicareHMO paymentChoice modelsWelfare

JEL Classifications

I 11I 18

Copyright information

© Springer Science+Business Media, LLC 2008