We study choice over prescription insurance plans by the elderly using government administrative data to evaluate how these choices evolve over time. We find large "foregone savings" from not choosing the lowest cost plan that has grown over time. We develop a structural framework to decompose the changes in "foregone welfare" from inconsistent choices into choice set changes and choice function changes from a fixed choice set. We find that foregone welfare increases over time due primarily to changes in plan characteristics such as premiums and out-of-pocket costs; we estimate little learning at either the individual or cohort level.

We explore the in- and out- of sample robustness of tests for choice inconsistencies based on parameter restrictions in parametric models, focusing on tests proposed by Ketcham, Kuminoff and Powers (KKP). We argue that their non-parametric alternatives are inherently conservative with respect to detecting mistakes. We then show that our parametric model is robust to KKP's suggested specification checks, and that comprehensive goodness of fit measures perform better with our model than the expected utility model. Finally, we explore the robustness of our 2011 results to alternative normative assumptions highlighting the role of brand fixed effects and unobservable characteristics.