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CHAPTER 3. MEDIGAP 119 be of interest more generally. Settings with private supplemental coverage and public primary insurance are widespread. For example, in France more than 92 percent of the population holds private supplemental insurance to protect against the substantial coinsurance payments (10 to 40 percent) of the universal public health insurance system, and private supplemental policies that top up public health insurance benefits are popular in Austria, Belgium, and Denmark as well. 2 Yet despite economists’ interest in the interaction of public and private insurance as demonstrated by the large literature on crowd-out (cf. ??), there is relatively little work on the fiscal externalities associated with jointly held private and public insurance. 3 At a conceptual level, supplemental Medigap coverage could impose a negative or positive fiscal externality on Medicare. Because Medigap policies reduce the marginal price for care, it is straightforward to see that overall utilization and Medicare costs could increase. Medigap policies could alternatively decrease costs if, for example, reduced cost-sharing improved treatment adherence, reducing the risk of hospitaliza- tion. In the context of Medicare supplemental insurance available to retired California state employees, ? find there is a significant positive cost externality of supplemental insurance, what they call an “offset effect,” for those that are chronically ill. 4 For the overall retiree population, however, the externality is negative with supplemental insurance increasing Medicare costs. The conventional wisdom is that supplemental insurance on net imposes a negative fiscal externality on Medicare, although the magnitude of the effect is contended. The central estimate, used by the Congressional Budget Office (CBO) for official budget 2 Statistics are from the following sources: ? “Selected European Countries Health Systems,” and ? “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613. In Austria, about a third of the population has a supplemental private insurance plan that covers additional charges not covered under the basic benefits, and about 30 percent of Belgians carry private supplemental policies. Approximately 30 percent of population in Denmark purchases Voluntary Health Insurance (VHI) in order to cover the costs of statutory copayments of the universal coverage package. 3 Exceptions include ?, ?, and ? on supplemental insurance. 4 The authors argue that drug coverage is probably the single most important channel through with the offset operates for the chronically ill. Even though the time period we look at is before Medicare Part D drug coverage was added, Medigap options that had drug coverage were very unpopular as their premiums were very high. Thus, we may expect the even among the chronically ill, Medigap private supplemental insurance may not have the offset effect the authors observe in the CALPERs population.
CHAPTER 3. MEDIGAP 120 estimates, is that “Medigap policyholders use at least 25 percent more services than Medicare enrollees who have no supplemental coverage.” Yet, as pointed out by ?, the research CBO draws upon does not account for selection in Medigap enrollment and may be biased. In particular, Lemiuex et al. argue that selection is probably adverse, leading these studies to overestimate the impact of Medigap on costs. Recent work, however, finds little or no evidence of adverse selection into Medigap. 5 In fact, Fang et al. (2008) find evidence of significant advantageous selection into Medigap. The authors argue that this advantageous selection is driven by cognitive ability, which is correlated with better health. We view our study as a natural next step in this literature. Our approach addresses the issue of selection by using plausibly exogenous variation in Medigap premiums. In particular, we take advantage of the fact that there is substantial within-state variation costs but limited within-state variation in premiums in the Medigap market. Using local medical costs as a control, we find that within-state but out of locality medical costs are a powerful predictor of premiums, providing us with a source of premium variation that is unrelated to unobserved determinants of individual medical costs. We estimate a Medigap selection equation using this variation to identify the premium elasticity of Medigap demand. Using the predicted values from this selection equation to instrument for Medigap enrollment, we consistently estimate the impact of Medigap on medical utilization. Our main finding is Medigap coverage increases overall medical costs by 57 percent on the margin. The effect is about 40 percent larger than comparable OLS estimates, consistent with advantageous selection. We also find that Medigap demand is mod- erately elastic, with our preferred estimate indicating that a 10 percent increase in premiums reduces take-up by 4.7 percentage points. Both the Medigap effect and demand semi-elasticity are precisely estimated and robust to alternative functional forms and sets of controls. In addition to indicating advantageous selection, the 40 percent larger instrumen- tal variables estimates for the effect of Medigap are consistent with heightened moral 5 These papers include ?, ?, ?, and ?.
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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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Payments CHAPTER 1. BANKRUPTCY 42 $
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OOP payments CHAPTER 1. BANKRUPTCY
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ln(seizable sssets) CHAPTER 1. BANK
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50 60 70 80 90 100 Insurance covera
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Pr(WTP > premium) CHAPTER 1. BANKRU
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CHAPTER 1. BANKRUPTCY 52 Table 1.1:
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CHAPTER 1. BANKRUPTCY 62 Table 1.11
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CHAPTER 1. BANKRUPTCY 64 Table 1.14
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CHAPTER 2. HEALTH PLAN CHOICE 66 pl
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Page 134 and 135: Chapter 3 Private Coverage and Publ
Page 138 and 139: CHAPTER 3. MEDIGAP 121 hazard for i
Page 140 and 141: CHAPTER 3. MEDIGAP 123 have benefit
Page 145 and 146: CHAPTER 3. MEDIGAP 128 We use boots
Page 147 and 148: CHAPTER 3. MEDIGAP 130 of costs and
Page 149 and 150: CHAPTER 3. MEDIGAP 132 policy that
Page 151 and 152: CHAPTER 3. MEDIGAP 134 3.6.2 Causal
Page 153 and 154: CHAPTER 3. MEDIGAP 136 3.6.3 Robust
Page 155 and 156: CHAPTER 3. MEDIGAP 138 calculated u
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CHAPTER 4. YEAR-END SPENDING 179 to
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CHAPTER 4. YEAR-END SPENDING 187 Ta
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