Evaluating Consumers' Choices of Medicare Part D Plans: A Study in Behavioral Welfare Economics

Michael Keane (), Jonathan Ketcham, Nicolai Kuminoff and Timothy Neal

No 25652, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose new methods to model behavior and conduct welfare analysis in complex environments where some choices are unlikely to reveal preferences. We develop a mixture-of-experts model that incorporates heterogeneity in consumers’ preferences and in their choice processes. We also develop a method to decompose logit errors into latent preferences versus optimization errors. Applying these methods to Medicare beneficiaries’ prescription drug insurance choices suggests that: (1) average welfare losses from suboptimal choices are small, (2) beneficiaries with dementia and depression have larger losses, and (3) policies that simplify choice sets offer small average benefits, helping some people but harming others.

JEL-codes: C25 D9 I13 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-dcm, nep-hea and nep-ias
Note: AG EH
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Published as Michael Keane & Jonathan Ketcham & Nicolai Kuminoff & Timothy Neal, 2020. "Evaluating consumers’ choices of Medicare Part D plans: A study in behavioral welfare economics," Journal of Econometrics, .

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Journal Article: Evaluating consumers’ choices of Medicare Part D plans: A study in behavioral welfare economics (2021)
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