Pricing Regulations in Individual Health Insurance: Evidence from Medigap (Job Market Paper)
In individual health insurance markets, consumers wish to insure long-term risks but may only buy one-year contracts. In the market for Medicare supplemental insurance ("Medigap"), states have adopted two regulatory solutions: (1) to prohibit price discrimination, and (2) to effectively create long-term contracts: the regulator establishes an initial open enrollment period and guarantees renewal at the same price offered to all other renewers. This paper is the first to leverage individual-level panel data on the entire Medigap market. I compare consumers living within 25 miles of a regulatory boundary, who are observationally equivalent but experience different pricing regulations. I find that insurance take-up is substantially higher under initial open enrollment with guaranteed renewal. When price discrimination is prohibited, insurance take-up drops by 9 percentage points (28 percent) and new Medigap buyers have insurer costs that are $138 (9 percent) higher per year. I find that when initial open enrollment with guaranteed renewal is in place, insurance take-up is higher for healthy and sick consumers alike. Prohibiting price discrimination eliminates the incentive for consumers to buy Medigap prior to the onset of chronic health conditions. The results suggest that initial open enrollment with guaranteed renewal may be a viable alternative to prohibiting price discrimination, a pricing regulation recently adopted in the exchanges established by the Affordable Care Act.
Can Health Insurance Competition Work? Evidence from Medicare Advantage
(with Liran Einav, Jonathan Levin, and Jay Bhattacharya)
R & R at the Journal of Political Economy
We estimate the economic surplus created by Medicare Advantage under its reformed competitive
bidding rules. We use data on the universe of Medicare beneficiaries, and develop a
model of plan bidding that accounts for both market power and risk selection. We estimate
that private plans have costs around 12 percent below fee-for-service costs, and generate
around 50 dollars in surplus on average per enrollee-month, after accounting for the disutility due
to enrollees having more limited choice of providers. Taxpayers provide a large additional
subsidy, and insurers capture most of the private gains. We use the model to evaluate possible
Health Care Spending and Utilization in Public and Private Medicare
(with Liran Einav, Amy Finkelstein, Jonathan Levin, and Jay Bhattacharya)
We compare healthcare spending in public and private Medicare using newly available private claims data from Medicare Advantage (MA) insurers. We find that healthcare spending is 27 percent lower in MA than for individuals in the same county and same risk score enrolled in public, traditional Medicare (TM). Spending differences between MA and TM are
similar across sub-populations of enrollees and sub-categories of care. They primarily reflect
differences in healthcare utilization. Average prices for an admission to a given hospital
for a given diagnosis are virtually identical in MA and TM. We present evidence consistent
with MA employing various types of utilization management and encouraging substitution
to relatively less expensive modes of care, such as use of primary care instead of specialists,
and outpatient rather than inpatient surgery. Geographic variation in healthcare spending
is larger in MA than in TM, although geographic variation in hospital prices is lower in MA
than in TM.
Early ACA Medicaid Expansions: Impacts on Enrollment and Access
(with Monica Bhole)
We use four states that were early adopters of Medicaid expansion to study how this expansion
affects enrollment and access to physicians for Medicaid enrollees. We use the universe of
Medicaid enrollment and claims data to construct state-month-level measures of enrollment,
enrollee composition, and access to physicians. Using a differences-in-differences framework,
we find that Medicaid expansion leads to a 13 percent increase in overall enrollment, a 27
percent increase in enrollment among adults ages 23 to 65, and a 7 percent increase in the
number of Medicaid patients seen by physicians. We find no statistically significant increase
in the number of Medicaid patients seen among obstetricians/gynecologists and pediatricians,
who are less likely to be affected by the expansion. We find that Medicaid expansion
increases physician participation on the intensive margin but not on the extensive margin.
Moral Hazard among the Disabled: A Regression Discontinuity Approach
(with Jay Bhattacharya, Kate Bundorf, and Kosali Simon)
In many countries, people buy private insurance to supplement coverage from a publicly
funded health care system. Because supplemental insurance often covers the patient cost
sharing of the public coverage, it can create externalities on the public program by increasing
the use of publicly-financed services. We estimate the magnitude of this effect in the
context of the U.S. Medicare program using a regression discontinuity approach based on a
change in insurer underwriting practices for private, supplemental insurance at age 65 for
disabled beneficiaries. We find that, on average, supplemental insurance substantially increases
Medicare-financed spending on outpatient but not inpatient services. Supplemental
insurance increases spending on outpatient services by 70-90 percent with approximately 80
percent of the increase in spending financed by the public program.
The Potential of Urban Boarding Schools for the Poor: Evidence from SEED (with Roland Fryer), 2014, Journal of Labor Economics, 32(1): 65-93.
Financial Literacy and Financial Sophistication in the Older Population (with Annamaria Lusardi and Olivia S. Mitchell), 2014, Journal of Pension Economics and Finance, 13(4): 347-366.
It May Not Take a Village: Increasing Achievement among the Poor (with Roland Fryer and Meghan L. Howard), 2011, in Whither Opportunity? Rising Inequality, Schools, and Children's Life Chances, p. 483-506, eds. Greg Duncan and Richard Murnane. New York: Russell Sage Foundation.
Financial Literacy among the Young (with Annamaria Lusardi and Olivia S. Mitchell), 2010, Journal of Consumer Affairs, 44(2): 358-380.