Sources of Advantageous Selection: Evidence from the Medigap Insurance Market

Hanming Fang, Michael Keane () and Dan Silverman

Journal of Political Economy, 2008, vol. 116, issue 2, 303-350

Abstract: We provide evidence of advantageous selection in the Medigap insurance market and analyze its sources. Conditional on controls for Medigap prices, those with Medigap spend, on average, $4,000 less on medical care than those without. But if we condition on health, those with Medigap spend $2,000 more. The sources of this advantageous selection include income, education, longevity expectations, and financial planning horizons, as well as cognitive ability. Conditional on all these factors, those with higher expected medical expenditures are more likely to purchase Medigap. Risk preferences do not appear as a source of advantageous selection; cognitive ability is particularly important. (c) 2008 by The University of Chicago. All rights reserved.

Date: 2008
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Working Paper: Sources of Advantageous Selection: Evidence from the Medigap Insurance Market (2006)
Working Paper: Sources of Advantageous Selection: Evidence from the Medigap Insurance Market (2006)
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