Beneficiary price sensitivity in the Medicare prescription drug plan market

Frakt, Austin B.; Pizer, Steven D.

doi:10.1002/hec.1451

Cited by 6 publications

(35 citation statements)

References 19 publications

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“…We find a mean firm‐level premium elasticity of −1.51 and within‐year elasticities of −1.41 for 2007, −1.45 for 2008, and −1.67 for 2009. These are similar to the −1.45 value obtained in other work (Frakt and Pizer, 2010). Our estimated elasticity is larger in absolute value than price elasticities estimated in other Medicare markets.…”

Section: Resultssupporting

confidence: 92%

“…The first is that premium is exogenous; so the OLS premium coefficient and associated elasticity estimates are unbiased. All are very similar to the results of Frakt and Pizer (2010), who estimated a similar model but with different independent variables and data for only 2007. In particular, their model did not include a measure of the proportion of drugs covered.…”

Section: Resultssupporting

confidence: 86%

“…We estimated an OLS model of Equation () with year, company, and year‐market fixed effects using Stata version 10. As noted in Section 3 above, we performed an IIA test with this specification by dropping a plan that is available in all markets, similar to the test performed in Frakt and Pizer (2010) on a similar model. As did that of Frakt and Pizer (2010), our test overwhelmingly failed to reject IIA ( χ 2 (118) = 111; p ‐value = 0.67).…”

Section: Resultsmentioning

confidence: 99%

“…Following Berry (1994) and Frakt and Pizer (2010), we estimate the model: where r indexes markets5 and j indexes plans within markets; s jr is the market share of plan j in market r ; s 0r is the market share for the composite ‘outside good’, purchased by those not enrolling in any plan; p jr is plan out‐of‐pocket (OOP) premium; x jr are observable plan characteristics; and ξ jr are unobservable plan characteristics. If plan characteristics and premiums are exogenous, then unbiased estimates of α and β can be obtained by ordinary least squares (OLS) estimation of Equation ().…”

Section: Conceptual Frameworkmentioning

confidence: 99%

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Should Medicare adopt the Veterans health administration formulary?

Frakt

Pizer

Feldman³

2011

Health Economics

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Since January 2006 all Medicare beneficiaries have been eligible to obtain outpatient prescription drug coverage through private stand-alone drug plans (PDPs). We estimate a model of beneficiary demand for PDPs and use it to compute the loss of consumer surplus due to tightening PDP formularies to the level found in the Veterans Health Administration (VA). Under a generous assumption of cost savings attributed to increased bargaining leverage associated with exclusion of more drugs from formularies, we find the loss in consumer surplus to be smaller than the financial savings that could be shared between Medicare and beneficiaries. According to our estimates, Medicare beneficiaries could be compensated for the loss in consumer surplus associated with tighter PDP formularies with the savings generated by such formularies.

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Section: Resultssupporting

confidence: 92%

Section: Resultssupporting

confidence: 86%

Section: Resultsmentioning

confidence: 99%

Section: Conceptual Frameworkmentioning

confidence: 99%

See 2 more Smart Citations

Should Medicare adopt the Veterans health administration formulary?

Frakt

Pizer

Feldman³

2011

Health Economics

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“…Frakt and Pizer (2010) and Lucarelli et al (2012) use aggregate data for demand estimation using the approach of Berry (1994). Both papers use the prescription drug plan finder to generate a dataset with region-plan pairs of stand-alone Part D plans.…”

Section: Related Literature and Implications For Our Study Designmentioning

confidence: 99%

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

Kesternich

Heiß

McFadden

et al. 2013

Journal of Health Economics

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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.

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Differences in price elasticities of demand for health insurance: a systematic review

2014

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Many health insurance systems apply managed competition principles to control costs and quality of health care. Besides other factors, managed competition relies on a sufficient price-elastic demand. This paper presents a systematic review of empirical studies on price elasticity of demand for health insurance. The objective was to identify the differing international ranges of price elasticity and to find socio-economic as well as setting-oriented factors that influence price elasticity. Relevant literature for the topic was identified through a two-step identification process including a systematic search in appropriate databases and further searches within the references of the results. A total of 45 studies from countries such as the USA, Germany, the Netherlands, and Switzerland were found. Clear differences in price elasticity by countries were identified. While empirical studies showed a range between -0.2 and -1.0 for optional primary health insurance in the US, higher price elasticities between -0.6 and -4.2 for Germany and around -2 for Switzerland were calculated for mandatory primary health insurance. Dutch studies found price elasticities below -0.5. In consideration of all relevant studies, age and poorer health status were identified to decrease price elasticity. Other socio-economic factors had an unclear impact or too limited evidence. Premium level, range of premiums, homogeneity of benefits/coverage and degree of forced decision were found to have a major influence on price elasticity in their settings. Further influence was found from supplementary insurance and premium-dependent employer contribution.

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Beneficiary price sensitivity in the Medicare prescription drug plan market

Cited by 6 publications

References 19 publications

Should Medicare adopt the Veterans health administration formulary?

Should Medicare adopt the Veterans health administration formulary?

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

Differences in price elasticities of demand for health insurance: a systematic review

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