Work

Strategic Formulary Design in Medicare Part D Plans

Year: 2018

Type: article

Abstract: The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spending, despite complementarities and substitutabilities between healthcare types. Fragmentation of only some plans can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formularies to induce enrollment by patients that are profitable in the medical insurance market. We study the design of insurance plans in Medicare Part D, and find that formularies reflects these two differences in incentives.

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.20160248

Authors: Kurt Lavetti, Kosali Simon

Institutions: The Ohio State University, Indiana University Bloomington, Indiana University

Language: English

Topic: Healthcare Policy and Management

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Institute on Aging

Award: Differences In Incentives Between Stand Alone Medicare Drug Coverage vs Medicare