scholarly journals Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D

2016 ◽  
Vol 8 (3) ◽  
pp. 165-195 ◽  
Author(s):  
Maria Polyakova
Keyword(s):  
Adverse Selection ◽  
Switching Costs ◽  
Consumer Surplus ◽  
Medicare Part D ◽  
Medicare Part ◽  
Pricing Model ◽  
Part D ◽  
Contract Choice ◽  
Pricing Dynamics ◽  
Per Capita

I take advantage of regulatory and pricing dynamics in Medicare Part D to explore interactions among adverse selection, inertia, and regulation. I first document novel evidence of adverse selection and switching frictions within Part D using detailed administrative data. I then estimate a contract choice and pricing model that quantifies the importance of inertia for risk sorting. I find that in Part D switching costs help sustain an adversely-selected equilibrium. I also estimate that active decision making in the existing policy environment could lead to a substantial gain in annual consumer surplus of on average $400–$600 per capita—20 percent to 30 percent of average annual spending. (JEL D82, G22, H51, I13, I18)

scholarly journals Inattention and Switching Costs as Sources of Inertia in Medicare Part D

2021 ◽  
Vol 111 (9) ◽  
pp. 2737-2781
Author(s):  
Florian Heiss ◽  
Daniel McFadden ◽  
Joachim Winter ◽  
Amelie Wuppermann ◽  
Bo Zhou
Keyword(s):  
Data Model ◽  
Switching Costs ◽  
Medicare Part D ◽  
Medicare Part ◽  
Part D ◽  
Plan Choice ◽  
Using Data ◽  
Two Stages ◽  
Ability And Willingness ◽  
Over Time

Consumers’ health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low-acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia. (JEL D12, G22, H51, I13, I18, L65)

Impact of Medicare Part D on out-of-pocket pharmaceutical costs for patients with cancer.

2013 ◽  
Vol 31 (15_suppl) ◽  
pp. 6517-6517
Author(s):  
Sheetal Mehta Kircher ◽  
Michael Johansen ◽  
Caroline Richardson ◽  
Matthew M Davis
Keyword(s):  
Prescription Drug ◽  
Medicare Part D ◽  
Medicare Part ◽  
Prescription Drug Coverage ◽  
Medicare Beneficiaries ◽  
Part D ◽  
Patients With Cancer ◽  
Per Capita ◽  
Nationally Representative ◽  
Pharmaceutical Costs

6517 Background: As federal policy, Medicare Part D was designed to reduce OOP costs for Medicare beneficiaries, but the extent to which this occurred for patients with cancer has not been measured. The aim of this study is to quantify the impact of Part D eligibility on out-of-pocket (OOP) cost for prescription drugs for cancer patients. Methods: Differences-in-differences analyses were used to estimate the effects of Medicare Part D eligibility on OOP pharmaceutical costs, by comparing 4-year periods before and after Part D implementation. Analyses were based on data from the publicly available Medical Expenditure Panel Survey, a nationally representative, all-payer sample of the United States non-institutionalized civilian population. Our analysis compared per-capita OOP burden between Medicare beneficiaries (age 65+) with cancer to near-elderly patients age 55-64 years old with cancer. Statistical weights provided with the dataset were used to generate nationally representative estimates. Results: Overall, 2,147 near-elderly individuals with cancer and 5,296 individuals with Medicare and cancer were included in the analysis (total n=7,443), representing over 88 million people with cancer in 8 years of study. As expected, prescription drug coverage more than doubled among individuals with Medicare from before Part D (34.4%) to after (77.8%); in contrast, prescription drug coverage among the near-elderly remained stable before vs. after Part D (72.0% vs. 71.1%). The mean per-capita OOP cost for Medicare beneficiaries with cancer before Part D was $935 (SE ±30) and decreased to $616 (±25) after implementation of Medicare Part D—a decline of 34%. Compared with changes in OOP pharmaceutical costs for non-elderly patients with cancer over the same period, implementation of Medicare Part D was associated with a further reduction of $159 (±73) per person with cancer. Conclusions: The implementation of Medicare D has significantly reduced OOP prescription drug costs for seniors with cancer, beyond trends observed for younger patients. Further analyses will examine OOP cost patterns for patients with cancer with specific sociodemographic and clinical characteristics.

Impact of Medicare Part D on out-of-pocket drug costs and utilization for patients with cancer.

2013 ◽  
Vol 31 (31_suppl) ◽  
pp. 275-275
Author(s):  
Sheetal Mehta Kircher ◽  
Michael Johansen ◽  
Matthew M. Davis
Keyword(s):  
Prescription Drug ◽  
Prescription Drugs ◽  
Medicare Part D ◽  
Drug Costs ◽  
Medicare Part ◽  
Prescription Drug Coverage ◽  
Medicare Beneficiaries ◽  
Part D ◽  
Patients With Cancer ◽  
Per Capita

275 Background: Medicare Part D was designed to reduce out of pocket (OOP) costs for Medicare beneficiaries, but the extent to which this occurred for patients with cancer has not been measured. The aim of this study is to quantify the impact of Part D eligibility on OOP cost for prescription drugs and utilization for cancer patients. Methods: Differences-in-differences analyses were used to estimate the effects of Medicare Part D eligibility on OOP drug costs, by comparing 4 year periods before and after Part D implementation. Analyses were based on data from the publicly available Medical Expenditure Panel Survey, a nationally representative, all-payer sample of the United States non-institutionalized civilian population. Our analysis compared per-capita OOP burden between Medicare beneficiaries (age 65+) with cancer to near-elderly individuals age 55-64 years old with cancer. Results: 2,077 near-elderly individuals with cancer and 4,723 individuals with Medicare and cancer were included (total n=6,800), representing over 85 million people. Prescription drug coverage increased among individuals with Medicare from before Part D (39%) to after (65%); in contrast, prescription drug coverage among the near-elderly remained stable before vs. after Part D (82.4% vs. 81.4%). The mean per-capita OOP cost for Medicare beneficiaries with cancer before Part D was $1,111 (SE ±45) and decreased to $694 (±35) after implementation of Medicare Part D—a decline of 37%. Compared with changes in OOP drug costs for non-elderly patients with cancer over the same period, implementation of Medicare Part D was associated with a further reduction of $286 per person. OOP costs for cancer-associated drugs (i.e., antineoplastic, pain medications, anti-emetics) accounted for 6.5-11.1% of the total OOP cost with no significant trends between 2002-2010. Conclusions: The implementation of Medicare D has significantly reduced OOP prescription drug costs for seniors with cancer, beyond trends observed for younger patients. Considering prescription drugs for all medical conditions, cancer associated drugs compose a minority of the cost, highlighting that cancer patients have many comorbid conditions contributing to overall costs.

scholarly journals Part D Formulary and Benefit Design as a Risk-Steering Mechanism

2011 ◽  
Vol 101 (3) ◽  
pp. 382-386 ◽  
Author(s):  
Dana P Goldman ◽  
Geoffrey F Joyce ◽  
William B Vogt
Keyword(s):  
Simulation Model ◽  
Adverse Selection ◽  
Drug Users ◽  
Medicare Part D ◽  
Medicare Part ◽  
Part D ◽  
Benefit Design ◽  
Pharmacy Claims ◽  
Prescription Drug Plans ◽  
Steering Mechanism

Medicare Part D relies upon drug plan competition. Plans have enormous scope to design benefits and to set premiums, but they may not charge differential premiums based on risk. We use the formulary and benefit design of all Medicare prescription drug plans and pharmacy claims data to construct a simulation model of out-of-pocket drug spending. We use this simulation model to examine individual incentives in Medicare Part D for adverse selection. We find that high drug users have much stronger incentives to enroll in generous plans than do low users, thus there is significant scope for adverse selection.

The role of satisfaction and switching costs in Medicare Part D choices

2014 ◽  
Vol 10 (2) ◽  
pp. 398-407 ◽  
Author(s):  
Jayoung Han ◽  
Dong Woo Ko ◽  
Julie M. Urmie
Keyword(s):  
Switching Costs ◽  
Medicare Part D ◽  
Medicare Part ◽  
Part D

scholarly journals Strategic Formulary Design in Medicare Part D Plans

2018 ◽  
Vol 10 (3) ◽  
pp. 154-192 ◽  
Author(s):  
Kurt Lavetti ◽  
Kosali Simon
Keyword(s):  
Health Insurance ◽  
Adverse Selection ◽  
Medical Insurance ◽  
Medicare Part D ◽  
Healthcare Spending ◽  
Insurance Market ◽  
Medicare Part ◽  
Part D ◽  
To Receive ◽  
Formulary Design

The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spending, despite complementarities and substitutabilities between healthcare types. Fragmentation of only some plans can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formularies to induce enrollment by patients that are profitable in the medical insurance market. We study the design of insurance plans in Medicare Part D and find that formularies reflect these two differences in incentives. (JEL D82, G22, H51, I13, I18, L65)

scholarly journals Inattention and Switching Costs as Sources of Inertia in Medicare Part D

2016 ◽  
Author(s):  
Florian Heiss ◽  
Daniel McFadden ◽  
Joachim Winter ◽  
Amelie Wuppermann ◽  
Bo Zhou
Keyword(s):  
Switching Costs ◽  
Medicare Part D ◽  
Medicare Part ◽  
Part D
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