ESSAYS ON MEDICARE PART D MARKET: SOURCES OF WELFARE EFFECTS AND MERGER AND ACQUISITION EFFECTS

This dissertation contains three essays on the Medicare Part D market in the United States. Three
chapters account the benefit of Medicare Part D, analyze how merger and acquisition affect
insurance plan’s characteristics and how merger and acquisition affect senior’s health outcomes.
The first chapter studies the benefits of Medicare Part D. The Medicare prescription drug program
(Part D) launched in 2006. Since then, the stand-alone prescription drug plans (PDPs) available to
consumers and their plan characteristics have been evolving. This paper examines how those
evolutions affect consumer surplus of Medicare beneficiaries. We estimate a structural demand
model of stand-alone PDPs for Medicare beneficiaries using plan level data across 34 markets
defined by Centers for Medicare and Medicaid Services (CMS) from 2008 to 2017. Encouragingly,
consumer surplus increases over time because there are more enhanced plans available in the
market over time despite the total number of plans available reduces over time. Nonetheless, such
effect of consumer surplus is unevenly distribution across markets because the evolutions of plan
availability and characteristics vary across markets.
The second chapter examines the effects of mergers and acquisitions (M&A) on Part D prescription
drug plans(PDPs). The Medicare prescription drug program (Part D) launched in 2006. Since then,
there has been a series of M&A among the parent companies providing the PDPs, which
concentrates the Medicare Part D market. This paper applies a differences-in-differences model to
a plan-level dataset from 2007 to 2019 to estimate the effects of M&A on plan’s premium,
characteristics, and market shares. We find that, on average, those M&A increases premium and
deteriorates plan quality but increases market share. Such effects are stronger in the Medicare
region that the merging insurers are serving together and in the mergers among publicly traded
(potentially larger) insurers but less in insurers are consolidating their plans.
The chapter 3 studies the effects of M&A on individual’s health outcomes. Given the previous
chapter reports that M&A among the parent companies providing the PDPs increases premium and
deteriorates plan quality, especially in the Medicare region that the merging insurers are serving
together. This chapter matches the individual-level data from the 2008-2018 waves of RAND
Health and Retirement Study (HRS) and the M&A and plan information from CMS Landscape,
and examine the effects of those M&As on seniors’ Part D participation, out-of-pocket costs and
prescription drug usage. We find that M&As increase the out-of-pocket (OOP) prescription drug
costs for enrollees and reduces their drug usage. Our results are consistent with elderly shifts their
plans with poorer coverage after the M&As and results in those poorer outcomes.