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The Welfare Impact Of Reducing Choice In Medicare Part D: A Comparison Of Two Regulation Strategies

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  • Claudio Lucarelli
  • Jeffrey Prince
  • Kosali Simon

Abstract

Motivated by widely publicized concerns that there are “too many” plans, we structurally estimate (and validate) an equilibrium model of the Medicare Part D market to study the welfare impacts of two feasible, similar‐sized approaches for reducing choice. One reduces the maximum number of firm offerings regionally; the other removes plans providing donut hole coverage—consumers’ most valued dimension. We find welfare losses are far smaller when coupled with elimination of a dimension of differentiation. We illustrate our findings’ relevance under current health care reforms, and consider the merits of instead imposing ex ante competition for entry.

Suggested Citation

  • Claudio Lucarelli & Jeffrey Prince & Kosali Simon, 2012. "The Welfare Impact Of Reducing Choice In Medicare Part D: A Comparison Of Two Regulation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1155-1177, November.
    • Handle: RePEc:wly:iecrev:v:53:y:2012:i:4:p:1155-1177
    DOI: j.1468-2354.2012.00715.x
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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