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

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

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.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 14124.

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Date of creation: Oct 2012
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Handle: RePEc:lmu:muenec:14124
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  8. Florian Heiss & Adam Leive & Daniel McFadden & Joachim Winter, 2012. "Plan Selection in Medicare Part D: Evidence from Administrative Data," NBER Working Papers 18166, National Bureau of Economic Research, Inc.
  9. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, March.
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  14. Heiss, Florian & McFadden, Daniel L. & Winter, Joachim, 2006. "Who failed to enroll in Medicare Part D, and why? Early results," Munich Reprints in Economics 19427, University of Munich, Department of Economics.
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  18. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  19. Florian Heiss & Daniel McFadden & Joachim Winter, 2009. "Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D," NBER Working Papers 15392, National Bureau of Economic Research, Inc.
  20. Alfnes, Frode & Guttormsen, Atle G. & Steine, Gro & Kolstad, Kari, 2006. "Ajae Appendix: Consumers’ Willingness To Pay For The Color Of Salmon: A Choice Experiment With Real Economic Incentives," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 88(4), November.
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