IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v111y2021i9p2737-81.html
   My bibliography  Save this article

Inattention and Switching Costs as Sources of Inertia in Medicare Part D

Author

Listed:
  • Florian Heiss
  • Daniel McFadden
  • Joachim Winter
  • Amelie Wuppermann
  • Bo Zhou

Abstract

Consumers' health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low-acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia.

Suggested Citation

  • Florian Heiss & Daniel McFadden & Joachim Winter & Amelie Wuppermann & Bo Zhou, 2021. "Inattention and Switching Costs as Sources of Inertia in Medicare Part D," American Economic Review, American Economic Association, vol. 111(9), pages 2737-2781, September.
    • Handle: RePEc:aea:aecrev:v:111:y:2021:i:9:p:2737-81
    DOI: 10.1257/aer.20170471
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20170471
    Download Restriction: no
    File URL: https://doi.org/10.3886/E132641V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20170471.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20170471.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/aer.20170471?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • 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
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Inattention and Switching Costs as Sources of Inertia in Medicare Part D (AER 2021) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:111:y:2021:i:9:p:2737-81. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.