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Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D

  • Florian Heiss
  • Daniel McFadden
  • Joachim Winter

We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets that control adverse selection and assure adequate access and coverage. We model Part D enrollment and plan choice assuming a discrete dynamic decision process that maximizes life-cycle expected utility, and perform counterfactual policy simulations of the effect of market design on participation and plan viability. Our model correctly predicts high Part D enrollment rates among the currently healthy, but also strong adverse selection in choice of level of coverage. We analyze alternative designs that preserve plan variety.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15392.

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Date of creation: Oct 2009
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Handle: RePEc:nbr:nberwo:15392
Note: AG HE
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