There is considerable geographical variation in the use of healthcare by beneficiaries of Medicare, the US federal health insurance program for people who are 65 or older. This research explores the extent to which regional disparities are driven by the providers, whose use of expensive tests or procedures might vary across different places, or by the patients, who might have different healthcare needs and preferences. Analyzing data on Medicare beneficiaries who have migrated from one part of the country to another, the study finds that patients and providers account for roughly equal shares of the differences in regional spending. The results provide a better understanding of the components of medical costs, adding nuance to the debate about possible inefficiencies in US healthcare spending.
A central question in the US debate over privatized Medicare is whether increased government contributions to private plans generate lower premiums for consumers or higher profits for producers. This research finds that insurance companies pass through 45% of higher payments in lower premiums and an additional 9% in more generous benefits for those who enroll in Medicare Advantage. Since the findings also suggest that the less than full pass-through is a result of insurer market power, efforts to make markets more competitive may be key to increasing the pass-through to consumers.