The consequences of a public health insurance option: Evidence from Medicare Part D
Publication Type
Journal Article
Publication Date
4-2019
Abstract
This paper structurally estimates a demand and supply model of Medicare Part D and evaluates counterfactual scenarios that introduce a public option competing alongside private insurers. The results show that a public option with a cost advantage expands coverage and crowds out private insurer enrollment, but has little effect on market premiums. Additional subsidy payments covering the expanded base of enrollees offset welfare gains regardless of the public option's cost position. In scenarios where private insurers cream skim the public option, risk adjustment payments create a pricing wedge that acts as a de facto subsidy for private insurers and a tax on the public option, limiting the public option's penetration but improving welfare through lower private insurer premiums. Risk corridors can be used as a lever to regulate the pricing wedge and redistribute surplus.
Keywords
Medicare Part D, health insurance, public option, risk adjustments
Discipline
Health Economics | Insurance
Research Areas
Corporate Communication
Publication
American Journal of Health Economics
Volume
5
Issue
2
First Page
191
Last Page
226
ISSN
2332-3493
Identifier
10.1162/ajhe_a_00119
Publisher
Massachusetts Institute of Technology Press (MIT Press): 12 month embargo
Citation
MILLER, Daniel P. and YEO, Jung Won.
The consequences of a public health insurance option: Evidence from Medicare Part D. (2019). American Journal of Health Economics. 5, (2), 191-226.
Available at: https://ink.library.smu.edu.sg/soe_research/2395
Additional URL
https://doi.org/10.1162/ajhe_a_00119