Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance

Am Econ Rev. 2016 Aug;106(8):2145-2184. doi: 10.1257/aer.20130778.

Abstract

We study choice over prescription insurance plans by the elderly using government administrative data to evaluate how these choices evolve over time. We find large "foregone savings" from not choosing the lowest cost plan that has grown over time. We develop a structural framework to decompose the changes in "foregone welfare" from inconsistent choices into choice set changes and choice function changes from a fixed choice set. We find that foregone welfare increases over time due primarily to changes in plan characteristics such as premiums and out-of-pocket costs; we estimate little learning at either the individual or cohort level.

Publication types

  • Research Support, N.I.H., Extramural

MeSH terms

  • Aged
  • Aged, 80 and over
  • Choice Behavior*
  • Consumer Behavior / statistics & numerical data
  • Cost Savings
  • Humans
  • Insurance, Pharmaceutical Services
  • Medicare Part D / economics
  • Medicare Part D / statistics & numerical data*
  • United States