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Myopia and complex dynamic incentives : evidence from Medicare Part D

Author: Christina M Dalton; Gautam Gowrisankaran; Robert J Town; National Bureau of Economic Research,
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2015.
Series: Working paper series (National Bureau of Economic Research), no. 21104.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
Standard Medicare Part D drug insurance provides limited coverage in a "donut hole" region, making the purchase problem dynamic. We develop a discontinuity-based test for myopia using enrollees who arrived near the coverage gap early in the year. We find that there are fewer and cheaper purchases immediately after reaching the gap, providing evidence in favor of myopia. We structurally estimate a dynamic drug  Read more...
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Details

Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Christina M Dalton; Gautam Gowrisankaran; Robert J Town; National Bureau of Economic Research,
OCLC Number: 907811328
Notes: "April 2015"
Description: 1 online resource (45 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 21104.
Responsibility: Christina M. Dalton, Gautam Gowrisankaran, Robert Town.

Abstract:

Standard Medicare Part D drug insurance provides limited coverage in a "donut hole" region, making the purchase problem dynamic. We develop a discontinuity-based test for myopia using enrollees who arrived near the coverage gap early in the year. We find that there are fewer and cheaper purchases immediately after reaching the gap, providing evidence in favor of myopia. We structurally estimate a dynamic drug purchase model and find complete myopia. For a nationally representative sample, "behavioral hazard" increases enrollee spending by 41%. Entirely eliminating the gap would increase insurer spending 31%, compared to 6% for generic-only gap coverage.

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