The Consequences of a Public Health Insurance Option: Evidence From Medicare Part D Prescription Drug Markets
نویسندگان
چکیده
This paper examines a public option competing alongside private insurers in Medicare Part D. We estimate a random coefficient demand system and oligopoly supply-side model with endogenous premium subsidies and risk adjustment payments. If the public option does not affect health risk sorting, counterfactual results show modest competitive benefits. However, increased subsidy payments eliminate welfare gains regardless of the public option’s cost position. If the public option adversely selects—facilitating insurers’ ability to cream-skim favorable risk—the risk adjustment mechanism creates a downward pricing distortion, amplifying competitive benefits. Despite greater selection, total surplus may increase, but the division favors insurers.
منابع مشابه
The interaction of partial public insurance programs and residual private insurance markets: evidence from the US Medicare program.
A ubiquitous form of government intervention in insurance markets is to provide compulsory, but partial, public insurance coverage and to allow voluntary purchases of supplementary private insurance. This paper investigates the effects of such programs on insurance coverage for the risks not covered by the public program, using the example of the US Medicare program. I find that Medicare does n...
متن کاملChoice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program
1180 The Medicare Modernization Act of 2003, better known as the legislation that added the Part D prescription drug benefit to the Medicare program, represents the single most significant expansion of public insurance programs in the US in the past 40 years. The most novel, and controversial, feature of this legislation was the use of multiple private insurance providers to deliver this new pu...
متن کاملPlan selection in Medicare Part D: evidence from administrative data.
We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare Part D suggests that fewer than 25% of individuals enroll in plans that are ex ante as good as the l...
متن کاملMind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans
Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription drug insurance. To characterize rational behavior in the complex Part D environment, we develop an inter...
متن کاملSupply Response to Consumer Inertia : Strategic Pricing in Medicare Part
A growing literature has documented evidence that consumers in health insurance markets are inertial, or behave as though they face substantial switching costs in choosing a health insurance plan. I investigate whether the private firms that provide prescription drug insurance through Medicare Part D exploit this inertia when setting prices. I first document descriptive evidence consistent with...
متن کامل