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Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D

Iris Kesternich (), Florian Heiss, Daniel McFadden and Joachim Winter ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: In recent years, consumer choice has become an important element of public policy. One reason is that consumers differ in their tastes and needs, which they can express most easily through their own choices. Elements that strengthen consumer choice feature prominently in the design of public insurance markets, for instance in the United States in the recent introduction of prescription drug coverage for older individuals via Medicare Part D. For policy makers who design such a market, an important practical question in the design phase of such a new program is how to deduce enrollment and plan selection preferences prior to its introduction. In this paper, we investigate whether hypothetical choice experiments can serve as a tool in this process. We combine data from hypothetical and real plan choices, elicited around the time of the introduction of Medicare Part D. We first analyze how well the hypothetical choice data predict willingness to pay and market shares at the aggregate level. We then analyze predictions at the individual level, in particular how insurance demand varies with observable characteristics. We also explore whether the extent of adverse selection can be predicted using hypothetical choice data alone.

Date: 2013
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Published in Journal of Health Economics 6 32(2013): pp. 1313-1324

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Journal Article: Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D (2013) Downloads
Working Paper: Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D (2012) Downloads
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