Working Paper: CEPR ID: DP8585
Authors: Jonathan D. Ketcham; Claudio Lucarelli; Eugenio J. Miravete; M. Christopher Roebuck
Abstract: Under Medicare Part D, senior citizens choose prescription drug insurance off red by numerous private insurers. We examine non-poor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81% of them. The greatest improvements were by those who overspent most in 2006 and by those who switched plans. Decisions to switch depended on individuals' overspending in 2006 and on individual-specific effects of changes in their current plans. The oldest consumers and those initiating medications for Alzheimer's disease improved by more than average, suggesting that real-world institutions help overcome cognitive limitations.
Keywords: insurance; plan switching; overspending; prescription drugs
JEL Codes: D01; D8; H51; I10; I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| switching plans (P21) | reduction in overspending (H62) |
| nonswitchers (C34) | reduction in overspending (H62) |
| switching plans (P21) | improvement in overspending (H62) |
| switching plans (P21) | mean incremental savings (D15) |
| previous year's overspending (H62) | likelihood of switching (C34) |
| age (85 and above) (J14) | reduction in overspending (H62) |
| individual-specific aspects of plans (D14) | switching decisions (D91) |