Internalizing Behavioral Externalities : Bene t Integration in Health Insurance

  title={Internalizing Behavioral Externalities : Bene t Integration in Health Insurance},
  author={Amanda Starc and Robert J. Town},
We show that pro t-maximizing rms alter product design in the market for Medicare prescription drug coverage to account for underutilization by consumers. Using plausibly exogenous variation, we document that plans that cover all medical expenses spend more on drugs than plans that are only responsible for prescription drug spending, consistent with drug spending o setting some medical costs. The e ect is driven by drugs that are likely to generate substantial o sets. Our supply side model con… CONTINUE READING


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