Association for Public Policy Analysis & Management

The proportion of Medicare beneficiaries enrolled in the privately administered Medicare Advantage (MA) plans has been growing over the last decade. Managed care plans have long used provider incentives to limit provision of care. Growth in Medicare managed care enrollment can potentially shift the mix of services offered by providers leading to system-wide changes in delivery of medical care and patient welfare. Previous research has shown that Medicare managed care penetration affects treatment intensity and patient outcomes in both managed care and fee-for-service Medicare plans, and non-Medicare commercial plans (Baicker, Chernew and Robbins, 2013; Baicker and Robbins, 2015). However, we know very little about how hospitals respond to Medicare managed care proliferation. To address this gap in knowledge, we empirically estimate the effect of MA market share on hospital technology adoption and the suite of services that hospitals offer. We instrument for endogenous enrollment in MA plans using variation in MA payment rates at the county-level. Preliminary results reveal differences in hospitals’ response to financial incentives based on high versus low share of Medicare beneficiaries enrolled in MA plans. The results of this study will advance the literature on hospital technology adoption and will shed light on the role of Medicare payment policies on hospital behavior.