American Economic Review Vol. 105 No. 4 2015
Medicare Part D: Are Insurers Gaming the Low Income Subsidy Design?
Abstract
This paper shows how in Medicare Part D insurers' gaming of the subsidy paid to low-income enrollees distorts premiums and raises the program cost. Using plan-level data from the first five years of the program, I find multiple instances of pricing strategy distortions for the largest insurers. Instrumental variable estimates indicate that the changes in a concentration index measuring the manipulability of the subsidy can explain a large share of the premium growth observed between 2006 and 2011. Removing this distortion could reduce the cost of the program without worsening consumer welfare.
- DOI
- 10.1257/aer.20130903
- Volume
- 105
- Issue
- 4
- Pages
- 1547-1580
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref