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Forum for Health Economics & Policy

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Better Quality of Care or Healthier Patients? Hospital Utilization by Medicare Advantage and Fee-for-Service Enrollees

Lauren Hersch Nicholas
  • Corresponding author
  • Institute for Social Research and Center for Healthcare Outcomes and Policy, University of Michigan, 426 Thompson St, 4205 MISQ, Ann Arbor, MI 48103
  • Email:
Published Online: 2013-05-15 | DOI: https://doi.org/10.1515/fhep-2012-0037


Do differences in rates of use among managed care and Fee-for-Service Medicare beneficiaries reflect selection bias or successful care management by insurers? I demonstrate a new method to estimate the treatment effect of insurance status on health care utilization. Using clinical information and risk-adjustment techniques on data on acute admission that are unrelated to recent medical care, I create a proxy measure of unobserved health status. I find that positive selection accounts for between one-quarter and one-third of the risk-adjusted differences in rates of hospitalization for ambulatory care sensitive conditions and elective procedures among Medicare managed care and Fee-for-Service enrollees in 7 years of Healthcare Cost and Utilization Project State Inpatient Databases from Arizona, Florida, New Jersey and New York matched to Medicare enrollment data. Beyond selection effects, I find that managed care plans reduce rates of potentially preventable hospitalizations by 12.5 per 1000 enrollees (compared to mean of 46 per 1000) and reduce annual rates of elective admissions by 4 per 1000 enrollees (mean 18.6 per 1000).

Keywords: hospital utilization; managed care; Medicare; selection bias


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About the article

Corresponding author: Lauren Hersch Nicholas, Institute for Social Research and Center for Healthcare Outcomes and Policy, University of Michigan, 426 Thompson St, 4205 MISQ, Ann Arbor, MI 48103, Phone: +734-764-2562, e-mail:

Published Online: 2013-05-15

Published in Print: 2013-01-01

Citation Information: Forum for Health Economics and Policy, ISSN (Online) 1558-9544, ISSN (Print) 2194-6191, DOI: https://doi.org/10.1515/fhep-2012-0037. Export Citation

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