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Performance Pay in Insurance Markets: Evidence from Medicare
- Source :
- The Review of Economics and Statistics. :1-45
- Publication Year :
- 2021
- Publisher :
- MIT Press - Journals, 2021.
-
Abstract
- Public procurement bodies increasingly resort to pay-for-performance contracts to promote efficient spending. We show that firm responses to pay-for-performance can widen the inequality in accessing social services. Focusing on the quality bonus payment initiative in Medicare Advantage, we find that higher quality-rated insurers responded to bonus payments by selecting healthier enrollees with premium differences across counties. Selection is profitable because the quality rating fails to adjust for differences in enrollee health. Selection inflated the bonus payments and shifted the supply of highrated insurance to the healthiest counties, reducing access to lower-priced, higher-rated insurance in the riskiest counties.
- Subjects :
- Economics and Econometrics
Inequality
Health Insurance Access
Medicare Advantage
media_common.quotation_subject
Social Welfare
Pay for performance
Quality Ratings
Procurement
Risk Selection
0502 economics and business
Quality (business)
050207 economics
health care economics and organizations
050205 econometrics
media_common
JEL: I - Health, Education, and Welfare/I.I1 - Health/I.I1.I14 - Health and Inequality
Actuarial science
05 social sciences
1. No poverty
JEL: L - Industrial Organization/L.L1 - Market Structure, Firm Strategy, and Market Performance/L.L1.L15 - Information and Product Quality • Standardization and Compatibility
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
Payment
JEL: I - Health, Education, and Welfare/I.I1 - Health/I.I1.I13 - Health Insurance, Public and Private
Pay-for-Performance
Business
Performance pay
Social Sciences (miscellaneous)
Subjects
Details
- ISSN :
- 15309142 and 00346535
- Database :
- OpenAIRE
- Journal :
- The Review of Economics and Statistics
- Accession number :
- edsair.doi.dedup.....870cc9c3a4d35e3a369af85b67836adf