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The Value of Coverage in the Medicare Advantage Insurance Market

  • Abe Dunn

    (Bureau of Economic Analysis)

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This paper examines the impact of coverage on demand for health insurance in the Medicare Advantage (MA) insurance market. Estimating the e¤ects of coverage on demand poses a challenge for researchers who must must consider both the hundreds of bene.ts that a¤ect out-of-pocket costs (OOPC) to consumers, but also the endogeneity of coverage. These problems are addressed in a discrete choice demand model by employing a unique measure of OOPC that considers a consumer.s expected payments for a .xed bundle of health services and applying instrumental variable techniques to address potential endogneity bias. The results of the demand model show that OOPC have a signi.cant e¤ect on consumer surplus and that not instrumenting for OOPC results in a signi.cant underestimate of the value of coverage.

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File URL: http://www.bea.gov/papers/pdf/medicarepaperWorkingPaper9_2_10.pdf
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Paper provided by Bureau of Economic Analysis in its series BEA Working Papers with number 0061.

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Date of creation: Sep 2010
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Handle: RePEc:bea:wpaper:0061
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