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CHAPTER 3. MEDIGAP 123 have benefits that generally cover more services than offered in traditional Medicare in exchange for beneficiaries accepting a more restricted network of providers. In our analysis, we model an individual’s choice between three options: Medicare Advan- tage, traditional Medicare without supplemental insurance, and traditional Medicare with supplemental insurance. In doing this, we exclude individuals on Medicaid or employer provided supplemental health insurance. 10 Table 3.2 shows the breakdown of individuals on the various types of supplemental insurance. Medigap beneficiaries typically purchase Medigap insurance within six months of turning 65 years old and signing up for traditional Medicare, during what is called the open enrollment period. During this period, individuals cannot be denied coverage for any reason, and pricing is limited to a small set of characteristics: gender, location, and smoking status of the enrollee. 11 Plans bought during this period are guaranteed renewable as long as Medigap enrollees pay plan premiums every year. The federal government regulates how Medigap policy prices can evolve. In particular, when an individual enrolls in a Medigap plan, he is choosing an age-price profile that may be adjusted with medical inflation but may not be contingent on his current or future health status. Thus, along with the contemporaneous benefits, Medigap coverage provides insurance against reclassification risk in future periods. In practice, individuals tend to sign up for a Medigap plan at age 65, and renew their policy each year. 12 In most states, individuals choose from a menu of standardized plans labeled A through J, administered by competing private insurance providers. 13 Table 3.3 plans tend to give more financial coverage in exchange for a more restricted network of providers relative to traditional Medicare. Since Medigap polices are tailored to fill gaps of traditional Medicare, the supplemental coverage that these policies would provide an individual on Medicare Advantage would be largely redundant. 10 Those who are offered employer sponsored insurance typically receive a good deal in that the plans are very subsidized. Since we believe that the take-up rate on employer-sponsored insurance is nearly 100 percent, we excluded those on employer sponsored supplemental insurance from our analysis as they have a different and unobserved choice set. 11 In practice, smoking status is not priced during the sample period we examine. 12 This is the pattern we observe in the 3-year panel of the Medicare Current Beneficiary Survey. 13 Massachusetts, Wisconsin, and Minnesota standardized their plans prior to federal regulation and have continued their own offerings. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) introduced plans K and L and eliminated the sale of Medigap plans with drug benefits (H, I and J).
CHAPTER 3. MEDIGAP 124 shows enrollment by plan letter and the plan characteristics in detail. Plans C and F, by far the most popular plans, are chosen by over 60 percent of the Medigap beneficiaries. Both of these plans cover the hospital and physician deductibles, in addition to the basic benefits common to all lettered plans. In this paper, we estimate the marginal effect of the average Medigap plan, rather than the effect of particular plan characteristics. We believe the marginal effect of Medigap captures a meaningful concept in this context because the vast majority of individuals are on Medigap plans face the same marginal change in prices. The common characteristics of the Medigap plans are ex ante the most likely drivers of moral hazard according to previous studies. In particular, it is thought that physician expenditures is one of the most flexible margins of health care spending, and all plans include Part B physician coinsurance coverage. 14 Part B coinsurance coverage it thought to generate substantial moral hazard because it dramatically reduces the marginal prices for doctor visits for almost everyone with physician expenditures. 15 3.3 Data We have two primary sources of data. We use the Medicare Current Beneficiary Survey (MCBS) for 2000 through 2005. This data is a short panel of Medicare beneficiaries that includes cost data by payer, information about Medigap coverage, demographic information and relatively detailed health status variables. In addition to the MCBS data, we use Medigap premium data from Weiss Ratings. We obtained premium data for 2000 and 2003. This data includes premiums charged during the open enrollment period by company, state, and plan letter. We use these two years of premiums to extrapolate premiums from 2000 to 2005. 16 We match MCBS beneficiaries with the prices they faced at age 65. This means 14 See ?. 15 Because elderly individuals almost all have physician expenditures of 135 dollars annually (the approximate value of the Part B deductible), the marginal price they face is the 20 percent coinsurance rate for physician visits beyond this deductible. Compare this to the Part B deductible coverage, which is not available in all plans, but probably doesnt lead to much moral hazard. 16 In particular, we assume a linear trend in premiums between 2000 and 2003. Using this trend, we project forward until 2005.
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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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CHAPTER 2. HEALTH PLAN CHOICE 68 ar
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Page 145 and 146: CHAPTER 3. MEDIGAP 128 We use boots
Page 147 and 148: CHAPTER 3. MEDIGAP 130 of costs and
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Page 151 and 152: CHAPTER 3. MEDIGAP 134 3.6.2 Causal
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