Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D. / Maria Polyakova.

Format:

Book

Author/Creator:

Polyakova, Maria.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21541.

NBER working paper series no. w21541

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Regulation of Insurance with Adverse Selection and Switching Costs

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

I take advantage of regulatory and pricing dynamics in Medicare Part D to empirically explore interactions among adverse selection, switching costs, and regulation. I first document novel evidence of adverse selection and switching costs within Part D using detailed administrative data. I then estimate a contract choice and pricing model in order to quantify the importance of switching costs for risk-sorting, and for policies that may affect risk sorting. I first find that in Part D, switching costs help sustain an adversely-selected equilibrium and are likely to mute the ability of ACA policies to improve risk allocation across contracts, leading to higher premiums for some enrollees. I then estimate that, overall, decreasing the cost of active decision-making in the Part D environment could lead to a substantial gain in consumer surplus of on average $400-$600 per capita, which is around 20%-30% of average annual per capita drug spending.

Notes:

Print version record

September 2015.