Subsidy Design in Privately-Provided Social Insurance: Lessons from Medicare Part D

Abstract

Timmins, and numerous seminar participants. Decarolis is grateful to the Sloan Foundation (grant 2011-5-23 ECON) for financial support. We also gratefully acknowledge support from the National Science Foundation (SES-1357705) and the National Institute on Aging (5P01AG005842-29). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Demand for health insurance marketplace plans was highly elastic in 2014–2015

“…The design of the Marketplaces themselves, with their standardized presentation of premiums and benefits, may also raise elasticities (Schmitz & Ziebarth, 2017). 6 The Medicare Part D market also involves standardized presentations, and past research has found large elasticities (between 5 and 6, larger even than those found here) for these plans which are also sold through a centralized portal (Decarolis, Polyakova, & Ryan, 2015;Lucarelli, Prince, & Simon, 2012).…”

Predicting Insurance Demand from Risk Attitudes

“…We are motivated by an underlying tension in the literature analyzing insurance demand in market settings. A number of studies use observed insurance choices to estimate structural models of risk preferences, and then use those structural models to inform policy by predicting demand in alternative market conditions (e.g., Cohen and Einav, 2007;Decarolis et al, 2019;. The value of these counterfactual policy evaluations hinges on whether the model predictions are accurate.…”

Estimation of Insurance Deductible Demand Under Endogenous Premium Rates

“…Using administrative transactional data, Curto et al () highlight the importance of considering policy structure, provider competition, and subsidies when estimating demand elasticities in the specific case of Medicare Part C. Decarolis, Polyakova, and Ryan () investigate impacts of subsidies from the supply side for Medicare Part D, focusing on estimation of welfare effects to account for the estimated $9 billion in government costs that are distributed via returns in that program. Abaluck and Gruber () find that insureds in Medicare Part D exhibit inconsistent behavior by placing more weight on plan premiums than expected out‐of‐pocket costs (realizations of which are also impacted by deductible) when valuing plan financial incentives.…”