*Names in bold indicate Presenter
The bid system yields several testable predictions about plan behavior with important implications for beneficiary well-being. In markets where benchmarks are high relative to plan costs, plans can use rebates to offer more generous benefit packages. Thus, enrollment should be higher in these markets and average risk scores (indicating patient illness burden), should be higher as plans become attractive to sicker Medicare beneficiaries. I use county-level enrollment and payment data from the Centers for Medicare and Medicaid Services from 2006 - 2010 to estimate first difference regressions assessing the impact of MA plan bids and rebates on managed care enrollment.
Average MA penetration ranged from 19% in 2006 to 26% in 2010. Plan rebates ranged from an average $72.80 per enrollee per month in 2009 to $58.21 in 2010, though there was considerable variation across counties and over time. On average, Medicare Advantage enrollees were healthier than the average Medicare beneficiary, with a risk score of 0.95 (relative to average risk 1).
More generous managed care benefit packages encourage sicker beneficiaries to enroll in Medicare Advantage plans, though MA enrollees remained healthier than average Medicare beneficiaries. I find that increases in average rebate amount paid to plans (three-quarters of the difference between the benchmark and their bid) increases both total enrollment in Medicare Advantage plans and enrollment by higher cost (and presumably sicker) Medicare beneficiaries. A $10 increase in the monthly, per-enrollee rebate amount used to support supplemental benefits is associated with a 0.3 percentage point increase in county MA penetration and a 0.08 increases in average MA enrollee risk score. On average, MA plans were able to provide a standard benefit package for significantly less than the county benchmark, suggesting that lower payments to MA plans may be a source for future Medicare savings. Higher payments to MA plans do not appear to target the sickest Medicare beneficiaries.