Working Paper: NBER ID: w15392
Authors: Florian Heiss; Daniel McFadden; Joachim Winter
Abstract: We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets that control adverse selection and assure adequate access and coverage. We model Part D enrollment and plan choice assuming a discrete dynamic decision process that maximizes life-cycle expected utility, and perform counterfactual policy simulations of the effect of market design on participation and plan viability. Our model correctly predicts high Part D enrollment rates among the currently healthy, but also strong adverse selection in choice of level of coverage. We analyze alternative designs that preserve plan variety.
Keywords: No keywords provided
JEL Codes: C25; D12; H51; I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| design of the Medicare Part D program (H51) | enrollment rates (I24) |
| late enrollment penalty (H55) | enrollment rates (I24) |
| government subsidies (H20) | enrollment rates (I24) |
| late enrollment penalty (H55) | adverse selection (D82) |
| adverse selection (D82) | variety of plans available (G52) |
| adverse selection (D82) | availability of comprehensive coverage plans (G52) |
| premiums rise (G52) | average drug bill of those enrolling in comprehensive plans (I13) |
| absence of proper subsidies and risk adjustments (D52) | viability of enhanced plans (O22) |