Table 3:
Results: Counterfactual Subsidy Mechanisms with Fixed Outside Option
| Observed Allocation |
Remove cross- market links | Change market power |
Subsidies proportional to bids | Flat voucher subsidies |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regular enrollees | LIS enrollees | No LIS link | No LIS, no MA-PD link | Independent Plans | Monopoly Ownership | p=5% of bid | p=32% of bid | p=95% of bid | $0 | Optimal voucher: $800 | $1,500 | |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | |
| (1) Consumer surplus, $M | 2,298 | 2,642 | 2,678 | 3,028 | 3,080 | 2,443 | 11,032 | 3,613 | 974 | 950 | 2,955 | 10,742 |
| (2) Insurer profit, $M | 559 | - | 1,062 | 1,205 | 1,154 | 1,923 | 35,260 | 3,821 | 40 | 27 | 1,311 | 2,605 |
| (3) Consumer and producer surplus, $M | 2,857 | 2,642 | 3,739 | 4,233 | 4,235 | 4,367 | 46,293 | 7,434 | 1,014 | 977 | 4,266 | 13,347 |
| (4) Subsidy spending in PDP, $M | 4,181 | 14,210 | 5,686 | 6,881 | 6,964 | 5,885 | 59,216 | 11,966 | (35) | (56) | 6,676 | 22,094 |
| (5) Reinsurance spending in PDP, $M | 1,264 | 26,502 | 1,502 | 1,692 | 1,764 | 1,307 | 4,551 | 2,552 | 52 | 34 | 1,707 | 3,023 |
| (6) Total government spending, $M | 5,445 | 40,712 | 7,188 | 8,573 | 8,728 | 7,192 | 63,768 | 14,518 | 17 | (22) | 8,383 | 25,117 |
| (7) Counterfactual subsidy spending if enrolled in MA-PD, $M | 4,686 | 16,469 | 5,680 | 6,466 | 6,548 | 5,194 | 10,578 | 6,880 | 144 | 97 | 6,316 | 10,739 |
| (8) Counterfactual reinsurance spending if enrolled in MA-PD, $M | 1,209 | 17,496 | 1,455 | 1,649 | 1,669 | 1,339 | 2,636 | 1,744 | 39 | 26 | 1,612 | 2,674 |
| (9) Total opportunity cost of government spending, $M | 5,894 | 33,965 | 7,135 | 8,115 | 8,217 | 6,533 | 13,214 | 8,623 | 183 | 123 | 7,927 | 13,413 |
| (10) Total surplus; not accounting for opportunity cost of gov. spending, $M | (4,222) | (50,283) | (5,605) | (6,912) | (7,112) | (4,983) | (36,605) | (11,439) | 992 | 1,005 | (6,632) | (19,305) |
| (11) Total surplus; accounting for opportunity cost of gov. spending, $M | 3,441 | (6,129) | 3,671 | 3,638 | 3,570 | 3,510 | (19,426) | (229) | 1,230 | 1,165 | 3,674 | (1,868) |
| (12) Return on nominal dollar of gov. spending, $, no DWL of tax | (0.48) | (0.94) | (0.48) | (0.51) | (0.51) | (0.39) | (0.27) | (0.49) | 59.13 | (46.29) | (0.49) | (0.47) |
| (13) Return on nominal dollar of gov. spending, $, with DWL of tax | (0.60) | (0.95) | (0.60) | (0.62) | (0.63) | (0.53) | (0.44) | (0.61) | 45.26 | (35.84) | (0.61) | (0.59) |
| (14) Opportunity cost adjusted return on dollar of gov. spending, $ | 0.63 | (0.15) | 0.51 | 0.42 | 0.41 | 0.49 | (0.30) | (0.02) | 72.93 | (54.00) | 0.44 | (0.07) |
| (15) Characteristics of the allocation | ||||||||||||
| (16) Inside option enrollment, ‘000 | 7,798 | 7,700 | 9,745 | 11,284 | 11,425 | 8,955 | 19,879 | 11,856 | 248 | 182 | 10,985 | 20,450 |
| (17) Inside option enrollment, percent of total market | 36 | 79 | 45 | 52 | 53 | 42 | 92 | 55 | 1 | 1 | 51 | 95 |
| (18) Share of inside option enrollment by Risk Group 1 consumers, percent | 6 | - | 6 | 7 | 7 | 7 | 7 | 6 | 0 | 0 | 7 | 7 |
| (19) Risk Group 2 | 17 | - | 18 | 18 | 17 | 19 | 21 | 15 | 67 | 72 | 18 | 23 |
| (20) Risk Group 3 | 59 | - | 60 | 61 | 61 | 58 | 62 | 64 | 2 | 1 | 61 | 60 |
| (21) Risk Group 4 | 16 | - | 14 | 13 | 13 | 15 | 10 | 13 | 31 | 27 | 14 | 9 |
| (22) Risk Group 5 | 1 | - | 1 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 1 | 1 |
| (23) Average weighted premium, $ | 510 | 25 | 474 | 438 | 441 | 450 | 201 | 603 | 1,448 | 1,531 | 444 | 78 |
| (24) Average weighted bid, $ | 1,129 | 1,051 | 1,170 | 1,174 | 1,175 | 1,254 | 4,011 | 1,885 | 1,524 | 1,531 | 1,244 | 1,473 |
Table reports the levels of consumer surplus, producer surplus, government spending, and total welfare under the observed allocation (columns 1 and 2) and under counterfactual allocations with a fixed outside option (columns 3 to 12). We compute these objects using estimates of demand and marginal costs (for columns 1 and 2), as well as simulations of counterfactual equilibria (columns 3 to 12). All quantities are computed as discussed in Section 3 and Appendix Section E. These baseline results assume that the cost of public funds (λ) is equal to 1.3. Negative quantities reported in parentheses.