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American Economic Review: Vol. 101 No. 4 (June 2011)

AER Volume. 101, Issue 4 | Previous ArticleNext Article

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Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program

Article Citation

Abaluck, Jason, and Jonathan Gruber. 2011. "Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program." American Economic Review, 101(4): 1180-1210.

DOI: 10.1257/aer.101.4.1180

Abstract

We evaluate the choices of elders across their insurance options under the Medicare Part D Prescription Drug plan, using a unique dataset of prescription drug claims matched to information on the characteristics of choice sets. We document that elders place much more weight on plan premiums than on expected out-of-pocket costs; value plan financial characteristics beyond any impacts on their own financial expenses or risk; and place almost no value on variance- reducing aspects of plans. Partial equilibrium welfare analysis implies that welfare would have been 27 percent higher if patients had all chosen rationally. (JEL D12, I11, J14)

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Authors

Abaluck, Jason (MIT)
Gruber, Jonathan (MIT)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
I11: Analysis of Health Care Markets
J14: Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination