I previous reported on an NBER study finding that medicare advantage expansion lowers hospital costs for other patients as well. But I missed something picked up by Austin Frakt. The government gets money back from spending on MNA plans. From the study:
[I]ncreasing MA monthly payments by $100 (about one standard deviation) would increase the share of beneficiaries in MA by just under 5 percentage points…This would increase total MA spending by $100 per month for the existing and new enrollees, or almost $5 billion in total for these states. Overall costs of hospital care is estimated to go down by something like 2% when MA penetration increases by 5 percentage points, off a base of total hospital costs for the [traditional Medicare] population remaining in these states (after the implied shift to MA) of just under $30 billion, or about $600 million. Hospital costs for those in [traditional Medicare] would thus go down by upwards of 10% of the increase in spending on MA.
However, the 2% reduction in hospital care cost also applies to the commercial market, so the estimated, system-wide savings are larger than estimated in this example. (Why didn’t the authors provide the system-wide savings figure?) Still, it’s unlikely that additional MA payments are fully offset by spillovers.
Remember that the federal government is heavily subsidizing the rest of the market — paying two thirds of Medicaid and, say, one-third of private coverage (thought the income tax exclusion). So, although the feds may not get all their money back, they are getting a good chunk of it back.