Strategic Formulary Design in Medicare Part D Plans

Kurt Lavetti and Kosali Simon

American Economic Journal: Economic Policy, 2018, vol. 10, issue 3, 154-92

Abstract: 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-codes: D82 G22 H51 I13 I18 L65 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/pol.20160248
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Citations: View citations in EconPapers (23)

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Working Paper: Strategic Formulary Design in Medicare Part D Plans (2016)
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