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Subsidizing Inequality: Performance Pay and Risk Selection in Medicare

Abstract : Pay-for-performance is commonly employed to improve the quality of social services contracted out to firms. We show that insurer responses to pay-for-performance can widen the inequality in accessing social services. Focusing on the U.S. Medicare Advantage market, we find that high-quality insurance contracts responded to quality-linked payments by selecting healthier enrollees with premium differences across counties. The selection is profitable because the quality rating fails to adjust for pre-existing health differences of enrollees. As a result, quality improved mostly due to selection, and the supply of high-quality insurance shifted to the healthiest counties. Revising the quality rating could prevent these unintended consequences.
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Preprints, Working Papers, ...
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Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Thursday, October 21, 2021 - 9:32:38 PM
Last modification on : Monday, March 21, 2022 - 2:47:49 PM
Long-term archiving on: : Saturday, January 22, 2022 - 9:08:58 PM


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Michele Fioretti, Hongming Wang. Subsidizing Inequality: Performance Pay and Risk Selection in Medicare. {date}. ⟨hal-03393070⟩



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