THE WELFARE IMPACT OF REDUCING CHOICE IN MEDICARE PART D: A COMPARISON OF TWO REGULATION STRATEGIES

Claudio Lucarelli, Jeffrey Prince and Kosali Simon

International Economic Review, 2012, vol. 53, issue 4, 1155-1177

Abstract: Motivated by widely publicized concerns that there are “too many” plans, we structurally estimate (and validate) an equilibrium model of the Medicare Part D market to study the welfare impacts of two feasible, similar‐sized approaches for reducing choice. One reduces the maximum number of firm offerings regionally; the other removes plans providing donut hole coverage—consumers’ most valued dimension. We find welfare losses are far smaller when coupled with elimination of a dimension of differentiation. We illustrate our findings’ relevance under current health care reforms, and consider the merits of instead imposing ex ante competition for entry.

Date: 2012
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https://doi.org/10.1111/j.1468-2354.2012.00715.x

Related works:
Working Paper: The Welfare Impact of Reducing Choice in Medicare Part D: A Comparison of Two Regulation Strategies (2009)
Working Paper: The Welfare Impact of Reducing Choice in Medicare Part D: A Comparison of Two Regulation Strategies (2008)
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