Sharing the Burden of Subsidization: Evidence on Pass-Through from a Subsidy Revision in Medicare Part D / Colleen Carey.

Format:

Book

Author/Creator:

Carey, Colleen.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28529.

NBER working paper series no. w28529

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

In many federally-subsidized insurance markets, insurers are subsidized on the basis of enrollee characteristics; in principle, subsidies that are "risk adjusted" in this way compensate insurers for ex ante differences in expected cost. Between 2010 and 2011, the subsidies in Medicare Part D were revised, sharply changing the subsidy for diagnoses and demographic characteristics. This paper uses the response of insurers to the subsidy update to estimate pass-through of government subsidies to two insurer choice variables: premiums and out-of-pocket costs. We find that diagnostic subsidies are passed-through at a rate of 40% to the out-of-pocket costs for relevant drugs. Premiums are not responsive to overall subsidies, but do reflect changes in the demographic component of subsidies.

Notes:

Print version record

March 2021.