essays in public finance and industrial organization a dissertation ...

Chapter 3
Private Coverage and Public
Costs: Identifying the Effect of
Private Supplemental Insurance on
Medicare Spending
with Marika Cabral
3.1 Introduction
In many insurance contexts, individuals hold primary and supplemental insurance
policies for the same basic outcome. A common example is the purchase of pri-
vate supplemental health insurance to top up publicly provided primary coverage. 1
However, unlike standard markets where complementarities between products are
typically isolated to the demand-side, complementarities between primary and sup-
plemental insurance can affect costs as well. A supplemental insurance policy that
reduces the consumer cost-sharing requirements (e.g., deductibles and co-payments)
1 Other examples include disability insurance, where private coverage can supplement public disability
insurance (SSDI) and rental car insurance, where coverage from a credit card can top-up the
primary rental car insurance provided by a rental company.
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