Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D

Florian Heiss, Daniel L. McFadden and Joachim Winter ()

No 15392, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C25 D12 H51 I11 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-ias and nep-reg
Date: 2009-10
Note: AG HE

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