Information in Medicare HMO markets : The interplay of advertising and report cards / Ashwin R. Patel.

Format:

Book

Manuscript

Thesis/Dissertation

Author/Creator:

Patel, Ashwin R.

Contributor:

Pauly, Mark V., 1941- advisor.

University of Pennsylvania.

Language:

English

Subjects (All):

Penn dissertations--Health care management and economics.

Health care management and economics--Penn dissertations.

Local Subjects:

Penn dissertations--Health care management and economics.

Health care management and economics--Penn dissertations.

Physical Description:

xi, 177 pages ; 29 cm

Production:

2011.

Summary:

This study incorporates advertising into the analysis of report cards and risk selection. We analyze the first large-scale dissemination of HMO quality report cards to 40 million Medicare beneficiaries in the fall of 1999.

Theoretically, we extend the canonical Dorfman-Steiner model to incorporate the role of report cards and risk selection into the firm's optimal choice of premium and advertising.

First, we explore the relationship between advertising and quality, prior to the actual report card release. We utilize an instrumental variables approach and find that high quality HMOs advertise more than low quality HMOs. In addition, greater advertising drives greater increases in HMO market shares.

Next, we study how the actual release of HMO report cards impacts HMO advertising behavior. We then analyze market share movements after the report card release, while incorporating associated changes in advertising expenditures and advertising credibility. We find that after the release of report cards, HMOs receiving higher ratings had lower relative advertising than firms receiving lower ratings. In addition, the report card release decreased the credibility of advertising by low quality firms, such that each dollar of advertising had a lower impact on increasing market share. Overall, we find that firms receiving below average ratings were able to offset the negative impact of the low ratings on market shares through advertising. We provide the first empirical evidence, to our knowledge, that advertising serves as a means to undermine the impact of report cards.

Third, we utilize individual-level survey data from Medicare HMO enrollees and find evidence that there exists a significant, positive relationship between advertising expenditures and health risk selection. Furthermore, the impact of advertising is similar for experienced and inexperienced individuals, suggesting a more persuasive role for advertising.

Together, these analysis provide a much richer understanding of the powerful role that advertising can play in Medicare HMO markets.

Notes:

Adviser: Mark V. Pauly.

Thesis (Ph.D. in Health Care Management and Economics) -- University of Pennsylvania, 2011.

Includes bibliographical references.