Medicare Advantage? The Effects of Managed Care on Quality of Care

Recent policy reforms have sought to expand the role of managed care in Medicare, despite limited information about quality of care provided by Medicare managed care (MMC) plans. This paper uses a unique inpatient hospitalization dataset containing over 9 million records to analyze outpatient quality and access to care in MMC in four states from 1999 - 2004. Several econometric strategies are used to address positive selection, which explains most of the observed differences in hospitalization rates. I find little evidence that plans improve outpatient management of chronic conditions or restrict access to elective procedures, though MMC plans respond to incentives to cream-skim and to prevent acute illness, reducing rates of preventable hospitalization for acute illness by 5 to 10 admissions per 1,000 enrollees. During the study period, MMC plans in included counties on average were paid $300 per enrollee per year more than Medicare spent on the average Fee-for-Service enrollee in the county, though these additional payments do not appear to have affected quality of care or targeted sicker Medicare enrollees.