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Paying Attention or Paying Too Much in Medicare Part D

Author

Listed:
  • Jonathan D. Ketcham
  • Claudio Lucarelli
  • Christopher A. Powers

Abstract

We study whether people became less likely to switch Medicare prescription drug plans (PDPs) due to more options and more time in Part D. Panel data for a random 20 percent sample of enrollees from 2006-2010 show that 50 percent were not in their original PDPs by 2010. Individuals switched PDPs in response to higher costs of their status quo plans, saving them money. Contrary to choice overload, larger choice sets increased switching unless the additional plans were relatively expensive. Neither switching overall nor responsiveness to costs declined over time, and above-minimum spending in 2010 remained below the 2006 and 2007 levels. (JEL H51, I13, I18)

Suggested Citation

  • Jonathan D. Ketcham & Claudio Lucarelli & Christopher A. Powers, 2015. "Paying Attention or Paying Too Much in Medicare Part D," American Economic Review, American Economic Association, vol. 105(1), pages 204-233, January.
  • Handle: RePEc:aea:aecrev:v:105:y:2015:i:1:p:204-33
    Note: DOI: 10.1257/aer.20120651
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    Citations

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    Cited by:

    1. Sinaiko, Anna & Zeckhauser, Richard, 2016. "Enrollee Choices after Their Health Plans Are Terminated: Default Effects versus Persistent Preferences," Working Paper Series rwp16-055, Harvard University, John F. Kennedy School of Government.
    2. Pilny, Adam & Wübker, Ansgar & Ziebarth, Nicolas R., 2017. "Introducing risk adjustment and free health plan choice in employer-based health insurance: Evidence from Germany," Journal of Health Economics, Elsevier, vol. 56(C), pages 330-351.
    3. Kate Ho & Joseph Hogan & Fiona Scott Morton, 2017. "The impact of consumer inattention on insurer pricing in the Medicare Part D program," RAND Journal of Economics, RAND Corporation, vol. 48(4), pages 877-905, December.
    4. Ulrike Malmendier, 2016. "The Bidder's Curse: Reply," American Economic Review, American Economic Association, vol. 106(4), pages 1195-1213, April.
    5. Maria Polyakova, 2016. "Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 165-195, July.
    6. Liran Einav & Amy Finkelstein & Maria Polyakova, 2016. "Private Provision of Social Insurance: Drug-specific Price Elasticities and Cost Sharing in Medicare Part D," NBER Working Papers 22277, National Bureau of Economic Research, Inc.
    7. Christina M. Dalton & Gautam Gowrisankaran & Robert Town, 2015. "Salience, Myopia, and Complex Dynamic Incentives: Evidence from Medicare Part D," NBER Working Papers 21104, National Bureau of Economic Research, Inc.
    8. Jonathan D. Ketcham & Nicolai V. Kuminoff & Christopher A. Powers, 2016. "Estimating the Heterogeneous Welfare Effects of Choice Architecture: An Application to the Medicare Prescription Drug Insurance Market," NBER Working Papers 22732, National Bureau of Economic Research, Inc.
    9. David Ong & Mengxia Zhang, 2016. "Choice averse behavior and sampling risk: a field experiment with actual shoppers," Framed Field Experiments 00547, The Field Experiments Website.
    10. Jonathan D. Ketcham & Nicolai V. Kuminoff & Christopher A. Powers, 2016. "Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Comment," American Economic Review, American Economic Association, vol. 106(12), pages 3932-3961, December.
    11. Andrew T. Ching & Tülin Erdem & Michael P. Keane, 2016. "Empirical Models of Learning Dynamics: A Survey of Recent Developments," Economics Papers 2016-W12, Economics Group, Nuffield College, University of Oxford.
    12. Francesco Decarolis & Maria Polyakova & Stephen P. Ryan, 2015. "The Welfare Effects of Supply-Side Regulations in Medicare Part D," NBER Working Papers 21298, National Bureau of Economic Research, Inc.
    13. Jason Abaluck & Jonathan Gruber, 2016. "Improving the Quality of Choices in Health Insurance Markets," NBER Working Papers 22917, National Bureau of Economic Research, Inc.
    14. repec:aea:jecper:v:32:y:2018:i:1:p:155-78 is not listed on IDEAS

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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