We study whether people became less likely to switch Medicare prescription drug plans (PDPs) due to more options and more time in Part D. Panel data for a random 20 percent sample of enrollees from 2006--2010 show that 50 percent were not in their original PDPs by 2010. Individuals switched PDPs in response to higher costs of their status quo plans, saving them money. Contrary to choice overload, larger choice sets increased switching unless the additional plans were relatively expensive. Neither switching overall nor responsiveness to costs declined over time, and above-minimum spending in 2010 remained below the 2006 and 2007 levels.

Consumers' enrollment decisions in Medicare Part D can be explained by Abaluck and Gruber’s (2011) model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases. We evaluate these competing hypotheses by applying nonparametric tests of utility maximization and model validation tests to administrative data. We find that 79 percent of enrollment decisions from 2006 to 2010 satisfied basic axioms of consumer theory under the assumption of full information. The validation tests provide evidence against widespread psychological biases. In particular, we find that precluding psychological biases improves the structural model's out-of-sample predictions for consumer behavior.

We study whether long-term cumulative exposure to airborne small particulate matter (PM2.5) affects the probability that an individual receives a new diagnosis of Alzheimer's disease or related dementias. We track the health, residential location, and PM2.5 exposures of Americans aged sixty-five and above from 2001 through 2013. The expansion of Clean Air Act regulations led to quasi-random variation in individuals’ subsequent exposures to PM2.5. We leverage these regulations to construct instrumental variables for individual-level decadal PM2.5 that we use within flexible probit models that also account for any potential sample selection based on survival. We find that a 1 µg/m3 increase in decadal PM2.5 increases the probability of a new dementia diagnosis by an average of 2.15 percentage points (pp). All else equal, we find larger effects for women, older people, and people with more clinical risk factors for dementia. These effects persist below current regulatory thresholds.

Under Medicare Part D, senior citizens choose prescription drug insurance offered by numerous private insurers. We examine nonpoor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81 percent of them. The greatest improvements were by those who overspent most in 2006 and by those who switched plans. Decisions to switch depended on individuals' overspending in 2006 and on individual-specific effects of changes in their current plans. The oldest consumers and those initiating medications for Alzheimer's disease improved by more than average, suggesting that real-world institutions help overcome cognitive limitations.