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CHAPTER 2. HEALTH PLAN CHOICE 93 do affect the interpretation of the effects of the different plan types on utilization of care. In particular,the reduction in insured costs for low risks in the network plan may represent, at least in part, a shift from insured to uninsured payments, rather than a reduction in utilization or prices. For high risks, in contrast, the difference in insured costs between the plans likely underestimates the extent to which the integrated plan reduces total costs. 2.5.2 Quantifying Social Welfare Inefficiencies In this section, we use the estimated demand and cost model to compute the inefficiency associated with observed contribution policies relative to alternative efficient benchmarks. We also compare welfare between the observed policies and alternative uniform contribution policies to demonstrate the extent to which the inefficiency associated with a uniform contribution could be reduced within the current institu- tional constraints. Table 2.6 presents the results of these simulations. The left-hand panels present the market share, average enrollee risk, and the average incremental contribution for each plan under five different pricing scenarios. The incremental contribution represents the monthly contribution per enrollee relative to the integrated HMO averaged across all households. The right-hand panels present information on the change in surplus relative to the observed allocation for each scenario. The Welfare Cost of Observed Prices In the top panels, we calculate the inefficiency of observed pricing policies relative to two risk-rated benchmarks. The first is individual risk rating based on the observed risk scores. This pricing policy, which we refer to as “feasible risk-rated contributions”, maximizes social welfare conditional on knowledge of the risk scores, but not each household’s private information. The third panel of the Table reports outcomes when prices are first-best, i.e. risk-rated based on both public and private information. Overall, under risk-rated contributions, high-risk households face higher premiums and low-risk households face somewhat lower premiums for the network plans relative to observed contribution policies. In both the feasible and first-best scenarios, this
CHAPTER 2. HEALTH PLAN CHOICE 94 leads to a substantial re-allocation of enrollees across plans, although overall market shares change modestly. With feasible risk-rating, the average enrollee risk at the integrated HMO increases from its observed level of 0.99 to 1.49, and the network HMO experiences a decline in average enrollee risk from 1.03 to 0.58. This reallocation of households across plans substantially reduces overall insurer costs, by $44 per enrollee-month, and increases total social surplus by just over $27 per enrollee-month. The increase in social welfare represents approximately 11% of average insurer costs in our sample. A substantial fraction of the welfare gain is due to the highest and lowest risk households making more efficient plan choices. Table 2.7 decomposes the welfare calculation by household risk quintiles. The lowest and highest risk quintiles (average household risk below 0.36 and above 1.33) generate about three-quarters of the welfare effect. This raises a concern that our calculation might be driven in part by extrapolating plan costs out of sample. As Figures 2.5 and 2.6 illustrate, we observe plan bids and costs only for average risk scores between 0.75 and 2.0. In contrast, household risk ranges from 0.16 to 30.1. To address this, we truncate the cost differentials between plans at their 0.75 and 2.0 levels and re-calculate the welfare numbers. These calculations appear in the final columns of Tables 2.6 and 2.7. We view the numbers based on truncated cost differences as a lower bound on welfare differences, and the baseline numbers based on straight-line extrapolation as closer to an upper bound. Truncating the cost differentials has little effect on the resulting assignment of households to plans, but as one might expect, it reduces the welfare cost of observed pricing to $5 per enrollee-month, or 2% of insurer costs, relative to the feasible optimum. It is also interesting to compare what is possible using prices based on observed risk scores to what in principle could be achieved using both observed risk scores and households’ private information. This calculation captures the extent to which private information on risk constrains the efficiency of feasible relative to optimal risk-rated pricing. Changing from feasible risk rated contributions to the first-best scenario increases social surplus by between $2 and $8 per enrollee-month, depending on the treatment of costs for extreme risk, or roughly 1-3 percent of insurer costs. One way
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ESSAYS IN PUBLIC FINANCE AND INDUST
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I certify that I have read this dis
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insurance choice. Among other thing
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Acknowledgements I am deeply thankf
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Contents Preface iv Acknowledgement
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2.5.3 The Value of Plan Choice ....
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List of Tables 1.1 Asset Exemption
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4.9 First Week Contract Spending fo
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4.3 I.T. Contracting by Week ......
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CHAPTER 1. BANKRUPTCY 2 of the dead
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CHAPTER 1. BANKRUPTCY 4 relevant le
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CHAPTER 1. BANKRUPTCY 6 superficial
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CHAPTER 1. BANKRUPTCY 8 After treat
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CHAPTER 1. BANKRUPTCY 12 newly edit
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CHAPTER 1. BANKRUPTCY 15 bound of t
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CHAPTER 1. BANKRUPTCY 20 or coverag
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CHAPTER 1. BANKRUPTCY 22 homestead
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CHAPTER 1. BANKRUPTCY 24 log seizab
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CHAPTER 1. BANKRUPTCY 26 on the bas
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CHAPTER 1. BANKRUPTCY 28 to seizabl
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CHAPTER 1. BANKRUPTCY 31 CARA utili
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CHAPTER 1. BANKRUPTCY 33 Puzzle 3:
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CHAPTER 1. BANKRUPTCY 35 of income
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CHAPTER 1. BANKRUPTCY 40 TaxSim pro
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Page 136 and 137: CHAPTER 3. MEDIGAP 119 be of intere
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Page 140 and 141: CHAPTER 3. MEDIGAP 123 have benefit
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Page 149 and 150: CHAPTER 3. MEDIGAP 132 policy that
Page 151 and 152: CHAPTER 3. MEDIGAP 134 3.6.2 Causal
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CHAPTER 3. MEDIGAP 144 Table 3.4: H
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CHAPTER 3. MEDIGAP 146 Table 3.6: S
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CHAPTER 3. MEDIGAP 148 Table 3.8: R
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CHAPTER 3. MEDIGAP 150 Table 3.10:
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CHAPTER 3. MEDIGAP 152 Table 3.12:
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CHAPTER 4. YEAR-END SPENDING 154 bu
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