Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans / Florian Heiss, Daniel McFadden, Joachim Winter.

Format:

Book

Author/Creator:

Heiss, Florian.

Contributor:

National Bureau of Economic Research.

McFadden, Daniel.

Winter, Joachim.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13627.

NBER working paper series no. w13627

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription drug insurance. To characterize rational behavior in the complex Part D environment, we develop an intertemporal optimization model of enrollment decisions. We generally find that seniors' choices respond to the incentives provided by their own health status and the market environment as predicted by the optimization model. The proportion of individuals who do not attain the optimal choice is small, but the margin for error is also small since enrollment is transparently optimal for most eligible seniors. Further, there is also evidence that seniors over-react to some salient features of the choice situation, do not take full account of the future benefit and cost consequences of their decisions, or the expected net benefits and risk properties of alternative plans.

Notes:

Print version record

November 2007.