Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D
American Economic Journal: Applied Economics
vol. 8,
no. 3, July 2016
(pp. 165-95)
Abstract
I take advantage of regulatory and pricing dynamics in Medicare Part D to explore interactions among adverse selection, inertia, and regulation. I first document novel evidence of adverse selection and switching frictions within Part D using detailed administrative data. I then estimate a contract choice and pricing model that quantifies the importance of inertia for risk sorting. I find that in Part D switching costs help sustain an adversely-selected equilibrium. I also estimate that active ?decision making in the existing policy environment could lead to a substantial gain in annual consumer surplus of on average $400-$600 per capita--20 percent to 30 percent of average annual spending.Citation
Polyakova, Maria. 2016. "Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D." American Economic Journal: Applied Economics, 8 (3): 165-95. DOI: 10.1257/app.20150004Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G22 Insurance; Insurance Companies; Actuarial Studies
- H51 National Government Expenditures and Health
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
There are no comments for this article.
Login to Comment