The Efficiency Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits

Mark Duggan, Jonathan Gruber, Boris Vabson

NBER Working Paper No. 21650
Issued in October 2015
NBER Program(s):The Program on Aging, The Health Care Program, The Health Economics Program, The Public Economics Program

There is considerable controversy over the use of private insurers to deliver public health insurance benefits. We investigate the efficiency consequences of patients enrolling in Medicare Advantage (MA), private managed care organizations that compete with the traditional fee-for-service Medicare program. We use exogenous shocks to MA enrollment arising from plan exits from New York counties in the early 2000s, and utilize unique data that links hospital inpatient utilization to Medicare enrollment records. We find that individuals who were forced out of MA plans due to plan exit saw very large increases in hospital utilization. These increases appear to arise through plans both limiting access to nearby hospitals and reducing elective admissions, yet they are not associated with any measurable reduction in hospital quality or patient mortality.

download in pdf format
   (255 K)

email paper

A non-technical summary of this paper is available in the 2016 number 1 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21650

Published: Duggan, Mark, Jonathan Gruber, and Boris Vabson. 2018. "The Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits." American Economic Journal: Economic Policy, 10 (1): 153-86. DOI: 10.1257/pol.20160068

Users who downloaded this paper also downloaded* these:
Doyle, Graves, and Gruber w21050 Uncovering Waste in U.S. Healthcare
Abaluck and Gruber w21617 The Robustness of Tests for Consumer Choice Inconsistencies
Duggan, Starc, and Vabson w19989 Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program
Fomenko and Gruber w22318 Claims-Shifting: The Problem of Parallel Reimbursement Regimes
Curto, Einav, Levin, and Bhattacharya w20818 Can Health Insurance Competition Work? Evidence from Medicare Advantage
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us