IDEAS home Printed from https://ideas.repec.org/p/cep/poidwp/034.html
   My bibliography  Save this paper

Political adverse selection

Author

Listed:
  • Leonardo Bursztyn
  • Jonathan Kolstad
  • Aakaash Rao
  • Pietro Tebaldi
  • Noam Yuchtman

Abstract

We study how the politicization of policies designed to correct market failures can undermine their effectiveness. The Patient Protection and Affordable Care Act (ACA) was among the most politically divisive expansions of the US government. We examine whether partisanship distorted enrollment and market outcomes in the ACA insurance marketplaces. Controlling for observable characteristics and holding fixed plans and premiums available, Republicans enrolled less than Democrats and independents in ACA marketplace plans. Selection out of the ACA marketplaces was strongest among Republicans with lower expected healthcare costs, generating adverse selection. Computing enrollment and average cost with and without partisan differences, we find that this political adverse selection reduced enrollment by around three million people and raised average costs in the marketplaces, increasing the level of public spending necessary to provide subsidies to low-income enrollees by around $105 per enrollee per year. Lower enrollments and higher costs are concentrated in more Republican areas, potentially contributing to polarized views of the ACA.

Suggested Citation

  • Leonardo Bursztyn & Jonathan Kolstad & Aakaash Rao & Pietro Tebaldi & Noam Yuchtman, 2022. "Political adverse selection," POID Working Papers 034, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:poidwp:034
    as

    Download full text from publisher

    File URL: https://poid.lse.ac.uk/textonly/publications/downloads/poidwp034.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    politicization; policies; marketplace; adverse;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cep:poidwp:034. 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: the person in charge (email available below). General contact details of provider: https://poid.lse.ac.uk/publications/working-papers/ .

    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.