Mortality Effects and Choice Across Private Health Insurance Plans (WP-20-37)
Jason Abaluck, Mauricio M. Caceres Bravo, Peter Hull, and Amanda Starc
Competition in health insurance markets may fail to improve health outcomes if consumers are not willing to pay for high quality plans. The researchers document large differences in the mortality rates of Medicare Advantage (MA) plans within local markets. They then show that when high (low) mortality plans exit these markets, enrollees tend to switch to more typical plans and subsequently experience lower (higher) mortality. They develop a framework that uses this variation to estimate the relationship between observed mortality rates and causal mortality effects; they find a tight link. The researchers then extend the framework to study other predictors of mortality effects and estimate consumer willingness to pay. Higher spending plans tend to reduce enrollee mortality, but existing quality ratings are uncorrelated with plan mortality effects. Consumers place little weight on mortality effects when choosing plans. Moving beneficiaries out of the bottom 5% of plans could save tens of thousands of elderly lives each year.
This paper is published in The Quarterly Journal of Economics.