TY  - JOUR
AU  - Heiss,Florian
AU  - McFadden,Daniel
AU  - Winter,Joachim
TI  - Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13627
PY  - 2007
Y2  - November 2007
UR  - http://www.nber.org/papers/w13627
L1  - http://www.nber.org/papers/w13627.pdf
N1  - Author contact info:
Florian Heiss
University of Duesseldorf  
LS Statistics and Econometrics
Universitaetsstrasse 1, Geb. 24.31
40225  Düsseldorf 
Germany
E-Mail:  florian.heiss@hhu.de

Daniel L. McFadden
University of California, Berkeley
Department of Economics
549 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-8428
Fax: 510/642-0638
E-Mail: mcfadden@econ.berkeley.edu

Joachim Winter
Department of Economics
LMU
Ludwigstr. 28 (RG)
D-80539 Munich
Germany
E-Mail: winter@lmu.de
M1  - published as Florian Heiss, Daniel McFadden, Joachim Winter. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," in David A. Wise, editor, "Research Findings in the Economics of Aging" University of Chicago Press (2010)

M3  - presented at "Economics of Aging", May 11- , 2007
AB  - Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription drug insurance. To characterize rational behavior in the complex Part D environment, we develop an intertemporal optimization model of enrollment decisions. We generally find that seniors' choices respond to the incentives provided by their own health status and the market environment as predicted by the optimization model. The proportion of individuals who do not attain the optimal choice is small, but the margin for error is also small since enrollment is transparently optimal for most eligible seniors. Further, there is also evidence that seniors over-react to some salient features of the choice situation, do not take full account of the future benefit and cost consequences of their decisions, or the expected net benefits and risk properties of alternative plans.
ER  -