The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D

Zarek Brot-Goldberg, Timothy Layton, Boris Vabson and Adelina Yanyue Wang

American Economic Review, 2023, vol. 113, issue 10, 2718-58

Abstract: We show in two natural experiments that default rules in Medicare Part D have large, persistent effects on enrollment and drug utilization of low-income beneficiaries. The implications of this phenomenon for welfare and optimal policy depend on the sensitivity of passivity to the value of the default option. Using random assignment to default options, we show that beneficiary passivity is extremely insensitive, even when enrolling in the default option would result in substantial drug consumption losses. A third natural experiment suggests that variation in active choice is driven by random transitory shocks rather than the inherent attentiveness of some beneficiaries.

JEL-codes: D91 I13 I18 I38 L65 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Working Paper: The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D (2021)
Working Paper: The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D (2021)
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DOI: 10.1257/aer.20210013

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