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Plan selection in Medicare Part D: Evidence from administrative data

Florian Heiss, Adam Leive, Daniel McFadden and Joachim Winter ()

Journal of Health Economics, 2013, vol. 32, issue 6, 1325-1344

Abstract: We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare Part D suggests that fewer than 25% of individuals enroll in plans that are ex ante as good as the least cost plan specified by the Plan Finder tool made available to seniors by the Medicare administration, and that consumers on average have expected excess spending of about $300 per year, or about 15% of expected total out-of-pocket cost for drugs and Part D insurance. These numbers are hard to reconcile with decision costs alone; it appears that unless a sizeable fraction of consumers place large values on plan features other than cost, they are not optimizing effectively.

Keywords: Medicare; Prescription drugs; Health insurance demand; Administrative data; Insurance claims data (search for similar items in EconPapers)
JEL-codes: I11 C25 D12 H51 I18 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Plan Selection in Medicare Part D: Evidence from Administrative Data (2012) Downloads
Working Paper: Plan Selection in Medicare Part D: Evidence from administrative Data (2012) Downloads
Working Paper: Plan selection in Medicare Part D: Evidence from administrative data (2012) Downloads
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