DP8585 Sinking, Swimming, or Learning to Swim in Medicare Part D

Author(s): Jonathan D. Ketcham, Claudio Lucarelli, Eugenio J Miravete, M Christopher Roebuck
Publication Date: September 2011
Keyword(s): Insurance Plan Switching, Overspending, Prescription Drugs
JEL(s): D01, D8, H51, I10, I11, I18
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8585

Under Medicare Part D, senior citizens choose prescription drug insurance off red by numerous private insurers. We examine non-poor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81% 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.