Medicare Medicare Advantage

Market Concentration in Medicare Advantage

From the Commonwealth Fund:

The analysis says people have many plans to choose from but that enrollment is concentrated in a handful. It notes, for example, that the average Medicare beneficiary in 2010 has 33 plans from which to choose. But in 14 states and the District of Columbia, a single company (not the same one in each state) accounts for more than half of all Medicare Advantage enrollment.

And in 27 states and the District, three companies account for 75 percent of more enrollees.

The question is whether ex-ante competition (beneficiaries having a large number of options) or ex-post competition (the market for Medicare Advantage being less concentrated) is important.  If the non-selected plans are good substitutes for the plans with a large market share, then the lack of ex-post competition is not a problem.  Likely, large plans have more market power to negotiate lower rates with physicians (which is a good thing for consumers).  If the large plans started charging higher premiums, beneficiaries may switch to another option which currently has lower market share.  Thus, ex-post market concentration does not necessarily indicate a lack of competition.

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