Political adverse selection

Leonardo Bursztyn, Jonathan T. Kolstad, Aakaash Rao, Pietro Tebaldi and Noam Yuchtman

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study how the politicization of policies designed to correct market failures can undermine their effectiveness. The Patient Protection and Affordable Care Act (ACA) was among the most politically divisive expansions of the US government. We examine whether partisanship distorted enrollment and market outcomes in the ACA insurance marketplaces. Controlling for observable characteristics and holding fixed plans and premiums available, Republicans enrolled less than Democrats and independents in ACA marketplace plans. Selection out of the ACA marketplaces was strongest among Republicans with lower expected healthcare costs, generating adverse selection. Computing enrollment and average cost with and without partisan differences, we find that this political adverse selection reduced enrollment by around three million people and raised average costs in the marketplaces, increasing the level of public spending necessary to provide subsidies to low-income enrollees by around $105 per enrollee per year. Lower enrollments and higher costs are concentrated in more Republican areas, potentially contributing to polarized views of the ACA.

JEL-codes: H51 I18 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-07-12
New Economics Papers: this item is included in nep-hea and nep-pol
References: Add references at CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/117908/ Open access version. (application/pdf)

Related works:
Working Paper: Political adverse selection (2022)
Working Paper: Political adverse selection (2022)
Working Paper: Political Adverse Selection (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:117908

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().