Health Care Management Papers

Document Type

Journal Article

Date of this Version

12-2013

Publication Source

Journal of Health Economics

Volume

32

Issue

6

Start Page

1325

Last Page

1344

DOI

10.1016/j.jhealeco.2013.06.006

Abstract

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 least cost plan specified by the Plan Finder tool made available to seniors by the Medicare administration, and that consumers on average have expected excess spending of about $300 per year, or about 15% of expected total out-of-pocket cost for drugs and Part D insurance. These numbers are hard to reconcile with decision costs alone; it appears that unless a sizeable fraction of consumers place large values on plan features other than cost, they are not optimizing effectively.

Copyright/Permission Statement

© . This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Medicare, prescription drugs, health insurance demand, administrative data, insurance claims data

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Date Posted: 27 November 2017

This document has been peer reviewed.