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CHAPTER 3. MEDIGAP 147
Table 3.7: Third Stage: OLS and Full Model Estimates of Medical Costs on Medigap
Indicator
Dependent Variable: Log Medical Costs
OLS Full Model
(1) (2) (3) (4) (5) (6)
Medigap 0.397 0.401 0.407 0.515 0.614 0.567
(0.054) (0.053) (0.049) (0.158) (0.146) (0.138)
Log HRR cost -0.071 0.233 0.128 -0.018 0.325 0.192
(0.132) (0.134) (0.124) (0.173) (0.171) (0.164)
Male -0.055 -0.071 -0.043 -0.049
(0.061) (0.079) (0.074) (0.070)
Age-65 0.817 0.904 0.810 0.890
(0.125) (0.114) (0.126) (0.118)
(Age-65)^2 -0.241 -0.299 -0.235 -0.278
(0.072) (0.065) (0.065) (0.061)
(Age-65)^3 0.023 0.030 0.021 0.027
(0.010) (0.009) (0.009) (0.008)
Disabled eligibility 0.419 0.333 0.422 0.346
Race group
(0.073) (0.067) (0.078) (0.074)
Asian -0.314 -0.206 -0.292 -0.289
(0.143) (0.136) (0.176) (0.175)
Black -0.098 -0.171 -0.050 -0.148
(0.090) (0.083) (0.113) (0.107)
Other 0.034 -0.079 0.052 -0.057
Education group
(0.141) (0.131) (0.168) (0.155)
High school 0.114 0.199 0.098 0.216
(0.069) (0.064) (0.086) (0.082)
Less than college 0.118 0.236 0.096 0.292
(0.073) (0.069) (0.087) (0.083)
College or more 0.184 0.347 0.156 0.404
(0.084) (0.080) (0.103) (0.098)
Log income -0.012 0.049 -0.006 0.037
(0.029) (0.026) (0.033) (0.030)
Married -0.081 0.011 -0.090 -0.058
(0.055) (0.052) (0.067) (0.062)
Working -0.429 -0.168 -0.434 -0.250
(0.060) (0.056) (0.066) (0.066)
Served in armed forces -0.107 -0.119 -0.101 -0.091
Self-reported health
(0.080) (0.073) (0.098) (0.091)
Excellent -0.616 -1.920
(0.140) (0.138)
Very good -0.565 -1.769
(0.136) (0.133)
Good -0.407 -1.392
(0.129) (0.130)
Fair -0.211 -0.890
(0.130) (0.140)
Diagnosis indicators Yes Yes
Treatment indicators Yes Yes
IADL indicators Yes Yes
Year FE Yes Yes Yes Yes Yes Yes
R-squared 3.6% 11.1% 29.4% 3.4% 10.7% 19.9%
N 3,415 3,415 3,415 3,415 3,415 3,415
Source: 2000-2005 MCBS; Weiss Ratings
Notes: Parameter estimates from cost equation. Specifications 1-3 show OLS estimates; 4-6 show estimates where
Medigap choice is instrumed for with the predicted values from the logit cost equation. See text for details. Sample of
individuals with HMO, Medigap or no supplemental coverage who turned 65 no sooner than 2000 excluding those with
positive VA expenditure. Omitted race group is white, education group is less than high school, and health status is poor.
Bootstrap standard errors looped over the premium and choice equations and clustered by individual in parentheses.
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