Medicare Part D: Are Insurers Gaming the Low Income Subsidy Design?

Francesco Decarolis

American Economic Review, 2015, vol. 105, issue 4, 1547-80

Abstract: This paper shows how in Medicare Part D insurers' gaming of the subsidy paid to low-income enrollees distorts premiums and raises the program cost. Using plan-level data from the first five years of the program, I find multiple instances of pricing strategy distortions for the largest insurers. Instrumental variable estimates indicate that the changes in a concentration index measuring the manipulability of the subsidy can explain a large share of the premium growth observed between 2006 and 2011. Removing this distortion could reduce the cost of the program without worsening consumer welfare. (JEL G22, H51, I13, I18)

JEL-codes: G22 H51 I13 I18 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20130903
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Citations: View citations in EconPapers (41)

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