Externalities and Benefit Design in Health Insurance

@article{Starc2015ExternalitiesAB,
  title={Externalities and Benefit Design in Health Insurance},
  author={Amanda Starc and Robert Town},
  journal={NBER Working Paper Series},
  year={2015}
}
Insurance plan design has important implications for consumer welfare. In this paper, we model insurance design in the Medicare prescription drug coverage market and show that strategic private insurer incentives impose a fiscal externality on the traditional Medicare program. We document that plans covering medical expenses have more generous drug coverage than plans that are only responsible for prescription drug spending, which translates into higher drug utilization by enrollees. The effect… Expand
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