Medicare eligibles have the option of choosing from a menu of privately administered managed care plans, known as Medicare Advantage (MA) plans, in lieu of conventional fee-for-service Medicare coverage ("original Medicare"). These plans often provide extra benefits to enrollees, but may impose large switching costs as a result of restrictive provider networks, differences in coverage across plans, and learning and search costs. I propose a structural dynamic discrete choice model of how consumers who are persistently heterogeneous make the choice among MA plans and original Medicare based on the characteristics of the available MA plans. The model explicitly incorporates a switching cost and changes over time in choice sets and plan characteristics. I estimate the parameters of the model, including the switching cost, using the methods developed by Gowrisankaran and Rysman (2011). The estimates indicate that the switching cost is statistically and economically significant. Through a series of counterfactual analyses, I find that the share of consumers choosing MA plans in place of original Medicare would more than triple in the absence of switching costs, and nearly double if plan exit and quality changes were eliminated. I also find that when switching costs are accounted for the Medicare Advantage program only minimally increases consumer welfare.

Objective: To examine spillovers from a federal policy, managed care market, and community perspective. Data Sources/Study Setting: We studied spillovers from a federal policy and managed care market perspective using the Health Care Utilization Project’s (HCUP) State Inpatient Database (SID). American Hospital Association (AHA) data, Interstudy Commercial Managed Care, and Area Health Resource File (AHRF). Medicare Advantage county-level payment schedules originate from CMS. We examined community uninsurance spillovers using 2011-2015 Medical Expenditure Panel Survey (MEPS), the Area Health Resource File (AHRF), and the Small Area Health Insurance Estimator (SAHIE). Study Design: Ordinary Least Squares (OLS) and difference-in-difference regression analyses were used to examine a federal policy spillover on hospital readmissions. We used OLS and instrumental variable (IV) estimation to examined Medicare Advantage (MA) spillovers on Medicare fee-for-service (FFS) hospital readmissions. We used logistic regression to examine community uninsurance spillovers on the privately insured. Principal Findings: After the HRRP, Medicare FFS saw a decrease in 30-day preventable condition- and all-cause readmissions. Medicare Advantage saw a positive spillover after the HRRP. MA market penetration has no effect on Medicare FFS hospital readmissions. High community uninsurance rates are associated with less access to behavioral health related outpatient/office-based and prescription utilization. Conclusions: HRRP had a positive spillover on MA hospital all-cause readmissions. MA market penetration has no effect on Medicare FFS readmissions. High levels of community uninsurance are associated with poorer access to outpatient/office-based and prescription behavioral related services.

The United States Health Care sector is a large and growing segment of the US economy. Herein, I present three distinct research projects regarding aspects of that industry, especially how it responds to public policy and government pro- grams. I focus primarily on the hospital sector, and the Medicare Advantage market. Additionally, I explore how ownership type-publicly owned versus for-profits, for example-behave differently. I investigate the relative efficiency of different ownership types in the US hospital industry. Earlier studies neglect the differential ability of the hospital types to choose their own market. We use a Dubin-McFadden approach to solve the endogeneity problem and estimate hospital efficiencies for each ownership type. Efficiencies are estimated using stochastic frontier analysis. Results indicate that accounting for location choice does affect estimates of efficiency and that for-profit hospitals have a relative advantage in smaller markets while public hospitals have a slight edge in larger markets. Next, I study entry decisions of insurance plans participating in the Medicare Advantage program. I use the prevailing models of entry to compare how for profit and non-profit insurance firms differentially emphasize the characteristics of potential markets. I also determine how the preferential treatment of non-profits affects the composition of markets and whether governments should adjust their treatment to encourage or discourage non-profit entry. Results indicate that non-profit insurance companies are more responsive to higher payment rates which suggest that they act more like for-profit firms than altruistic organizations. Finally, I estimate the how much net welfare, Medicare Advantage contributes to the US economy. I use the Medicare Current Beneciary Survey to estimate a discrete choice model of beneciaries' choice of traditional Medicare, Medigap, and Medicare Advantage. I use the results to calculate the net welfare; I find that Medicare Advantages, on net, increased social welfare by 7.76 billion dollars in 2005.

Managed care plans purport to improve the health of their members with chronic diseases. How has the growing adoption of Medicare Advantage (MA), the managed care program for Medicare beneficiaries, affected the progression of chronic disease? The literature is rich with articles focusing on managed care organizations' impacts on quality of care, access, patient satisfaction, and costs. However, few studies have analyzed these impacts with respect to market penetration of Medicare managed care. The objective of this research has been to analyze the relationships between the market penetration of MA plans and the progression of chronic diseases among Medicare beneficiaries. The Chronic Disease Severity Index scale (CDSI) was constructed to represent beneficiaries' overall chronic disease states for survey or claims-based data, when more direct clinical measures of disease progression are not available. Using the CDSI on the MEPS survey dataset from AHRQ, we sought to assess the impacts of MA market penetration and other covariates on the overall chronic disease state of Medicare beneficiaries from 2004 through 2008. Though the model explains much of the variation in CDSI change, the author expected the multilevel model would show that MA penetration explains a significant level of variation in CDSI change. However, this hypothesis was not substantiated, and the findings suggest that unmeasured factors may be contributing to additional unexplained heterogeneity. Policymakers should explore opportunities to refine the current MA program. The MA program costs the federal government more than the Traditional Fee-for-Service Medicare program, and there is no definitive evidence that outcomes differ. Within both programs, there is opportunity to experiment with different models of payment, healthcare service delivery and care coordination. The Patient Protection and Affordable Care Act (ACA) contains provisions for innovative demonstration projects in delivery and payment. The effectiveness of these ACA initiatives must be monitored, both for impacts on health outcomes and for economic effects. This research can inform future approaches to outcomes assessment using the CDSI, and multilevel modeling methodologies similar to those employed here. Firms offering MA health plans would be prudent to proactively demonstrate their value to beneficiaries and taxpayers. They should explore means of better monitoring and reporting the longitudinal outcomes of their enrolled beneficiaries. Demonstrating that they can bring value in terms of improved health outcomes will help insure their long-term survival, both in the marketplace and in the political arena. / Graduation date: 2012