Medicare Advantage Lowers Costs ― for Everyone

We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial ― offsetting more than 10% of increased payments to Medicare Advantage plans.

NBER paper by Katherine Baicker, Michael Chernew, Jacob Robbins.

Comments (11)

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  1. Sam says:

    These are some important findings that bring light to the importance of privatized competition in the health care industry.

  2. Tim says:

    Haven’t read much on Medicare Advantage but from what this study gleans, it seems like there is something to be said about stimulating competitions among private providers in order to reduce costs.

  3. August says:


    There may also be something to say about the government paying for private insurance.

  4. Cabaret says:

    Cool natural experiment!

    “This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. “

  5. Chaz says:

    Did this study just look at the Medicare Advantage plans that are managed care-type plans or was the effect across the board for the other types of Medicare Advantage plans?

  6. Zeratul says:

    The take away seems to be that stay away from hospitals as much as possible!

  7. Dewaine says:


    Maybe. Although, I’d be willing to bet that a private system would ultimately be better.

  8. Huda says:

    @ Zeratul

    Yes, I think you mean medical tourism. That is probably the best way to cut down on one’s medical bills.

  9. Dewaine says:


    Hopefully medical tourism will continue to be viable and legal.

  10. Yo Yo Ma says:

    This goes to show that health care solutions are best when they are diverse and outside of the health care system.

  11. Arnold says:

    Preventive care is a great source for lowering healthcare costs.