Incentive and selection effects of Medigap insurance on inpatient care

Valentino Dardanoni () and Paolo Li Donni ()

Journal of Health Economics, 2012, vol. 31, issue 3, 457-470

Abstract: The Medicare program, which provides insurance coverage to the elderly in the United States, does not protect them fully against high out-of-pocket costs. For this reason private supplementary insurance, named Medigap, has been available to cover Medicare gaps. This paper studies how Medigap affects the utilization of inpatient care, separating the incentive and selection effects of supplementary insurance. For this purpose, we use two alternative estimation methods: a standard recursive bivariate probit and a discrete multivariate finite mixture model. We find that estimated incentive effects are modest and quite similar across models. There seems to be very significant selection, with the presence of both adversely and advantageously selected individuals, stemming from the multidimensional nature of residual heterogeneity.

Keywords: Health insurance; Asymmetric information; Medigap; Health care demand; Finite mixture models (search for similar items in EconPapers)
JEL-codes: C52 D82 G22 I10 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (17)

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Working Paper: Incentive and Selection Effects of Medigap Insurance on Inpatient Care (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:31:y:2012:i:3:p:457-470

DOI: 10.1016/j.jhealeco.2012.02.007

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