Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange
AbstractI use the Medicare Part D prescription drug insurance market to examine the dynamics of firm interaction with consumers on an insurance exchange. Enrollment data show that consumers face switching frictions leading to inertia in plan choice, and a regression discontinuity design indicates initial defaults have persistent effects. In the absence of commitment to future prices, theory predicts firms respond to inertia by raising prices on existing enrollees, while introducing cheaper alternative plans. The complete set of enrollment and price data from 2006 through 2010 confirms this prediction: older plans have approximately 10% higher premiums than comparable new plans.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18359.
Date of creation: Sep 2012
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Note: AG HC PE
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-16 (All new papers)
- NEP-COM-2012-09-16 (Industrial Competition)
- NEP-HEA-2012-09-16 (Health Economics)
- NEP-IAS-2012-09-16 (Insurance Economics)
- NEP-MKT-2012-09-16 (Marketing)
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- Chetty, Raj & Friedman, John N. & Leth-Peterson, Soren & Nielsen, Torben Heien & Olsen, Tore, 2013.
"Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark,"
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rwp13-002, Harvard University, John F. Kennedy School of Government.
- Raj Chetty & John N. Friedman & Soren Leth-Petersen & Torben Nielsen & Tore Olsen, 2012. "Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark," NBER Working Papers 18565, National Bureau of Economic Research, Inc.
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