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Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D

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  • Kesternich, Iris
  • Heiss, Florian
  • McFadden, Daniel
  • Winter, Joachim

Abstract

In recent years, consumer choice has become an important element of public policy. One reason is that consumers differ in their tastes and needs, which they can express most easily through their own choices. Elements that strengthen consumer choice feature prominently in the design of public insurance markets, for instance in the United States in the recent introduction of prescription drug coverage for older individuals via Medicare Part D. For policy makers who design such a market, an important practical question in the design phase of such a new program is how to deduce enrollment and plan selection preferences prior to its introduction. In this paper, we investigate whether hypothetical choice experiments can serve as a tool in this process. We combine data from hypothetical and real plan choices, elicited around the time of the introduction of Medicare Part D. We first analyze how well the hypothetical choice data predict willingness to pay and market shares at the aggregate level. We then analyze predictions at the individual level, in particular how insurance demand varies with observable characteristics. We also explore whether the extent of adverse selection can be predicted using hypothetical choice data alone.

Suggested Citation

  • Kesternich, Iris & Heiss, Florian & McFadden, Daniel & Winter, Joachim, 2013. "Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D," Journal of Health Economics, Elsevier, vol. 32(6), pages 1313-1324.
  • Handle: RePEc:eee:jhecon:v:32:y:2013:i:6:p:1313-1324
    DOI: 10.1016/j.jhealeco.2012.11.006
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    Cited by:

    1. Ericson, Keith M. Marzilli & Starc, Amanda, 2016. "How product standardization affects choice: Evidence from the Massachusetts Health Insurance Exchange," Journal of Health Economics, Elsevier, vol. 50(C), pages 71-85.
    2. Kesternich, Iris & Heiss, Florian & McFadden, Daniel & Winter, Joachim, 2013. "Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D," Journal of Health Economics, Elsevier, vol. 32(6), pages 1313-1324.
    3. Emily Lancsar & Joffre Swait, 2014. "Reconceptualising the External Validity of Discrete Choice Experiments," PharmacoEconomics, Springer, vol. 32(10), pages 951-965, October.
    4. Donald S. Kenkel & Sida Peng & Michael F. Pesko & Hua Wang, 2017. "Mostly Harmless Regulation? Electronic Cigarettes, Public Policy and Consumer Welfare," NBER Working Papers 23710, National Bureau of Economic Research, Inc.
    5. Johannes G. Jaspersen, 2016. "Hypothetical Surveys And Experimental Studies Of Insurance Demand: A Review," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 217-255, January.
    6. Waleska Sigüernza & Petr Mariel, 2013. "Valoración económica de los servicios sanitarios en la Comunidad Autónoma del País Vasco," Hacienda Pública Española, IEF, vol. 207(4), pages 71-99, December.
    7. Keith Marzilli Ericson & Judd B. Kessler, 2013. "The Articulation Effect of Government Policy: Health Insurance Mandates Versus Taxes," NBER Working Papers 18913, National Bureau of Economic Research, Inc.
    8. Determann, Domino & Lambooij, Mattijs S. & de Bekker-Grob, Esther W. & Hayen, Arthur P. & Varkevisser, Marco & Schut, Frederik T. & Wit, G. Ardine de, 2016. "What health plans do people prefer? The trade-off between premium and provider choice," Social Science & Medicine, Elsevier, vol. 165(C), pages 10-18.
    9. Matthew Shapiro & Joseph Briggs & Chris Tonetti & Andrew Caplin & John Ameriks, 2016. "Late-in-Life Risks and the Under-Insurance Puzzle," 2016 Meeting Papers 241, Society for Economic Dynamics.
    10. Francesco Decarolis & Maria Polyakova & Stephen P. Ryan, 2015. "Subsidy Design in Privately-Provided Social Insurance: Lessons from Medicare Part D," NBER Working Papers 21298, National Bureau of Economic Research, Inc.
    11. Soetevent, Adriaan R. & Bruzikas, Tadas, 2016. "Risk and Loss Aversion, Price Uncertainty and the Implications for Consumer Search," Research Report 16015-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    12. Ericson, Keith Marzilli & Kessler, Judd B., 2016. "The articulation of government policy: Health insurance mandates versus taxes," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 43-54.
    13. repec:bla:ecinqu:v:55:y:2017:i:2:p:695-713 is not listed on IDEAS
    14. Nathan Kettlewell, 2016. "Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People get it Right?," Discussion Papers 2016-16, School of Economics, The University of New South Wales.
    15. John Ameriks & Joseph Briggs & Andrew Caplin & Matthew D. Shapiro & Christopher Tonetti, 2016. "The Long-Term-Care Insurance Puzzle: Modeling and Measurement," NBER Working Papers 22726, National Bureau of Economic Research, Inc.
    16. Jesús Clemente López & Pedro García Castrillo & María A. González Alvarez & Marcos Sanso Frago, 2014. "Una evaluación de la efectividad de la formación ocupacional para desempleados antes y después de la crisis económica: el caso de Aragón," Hacienda Pública Española, IEF, vol. 208(1), pages 77-106, March.

    More about this item

    Keywords

    Medicare; Health insurance demand; Hypothetical choice experiments;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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