|Vetter, Stefan and Heiss, Florian and McFadden, Daniel and Winter, Joachim (2012): Risk attitudes and Medicare Part D enrollment decisions. Discussion Papers in Economics 2012-8|
The new Medicare Part D program provides prescription drug coverage for older Americans through highly subsidized and tightly regulated plans offered by private insurance firms. For most eligible individuals without coverage from other sources, obtaining Part D coverage would be rational, but it requires active enrollment and plan choice decisions. We investigate if non-enrollment in Medicare Part D can partly be explained by risk aversion. Data are taken from a national online survey conducted just after the introduction Part D. The survey included a context-free and a context-related hypothetical lottery to measure an individual’s attitude towards risk. Respondents who are risk tolerant according to these measures were significantly less likely to enroll in Part D. We also illustrate that hypothetical choice questions designed to elicit risk attitudes are subject to reference-point effects. Even minor differences in the priming of respondents can result in potentially misleading conclusions about the role of risk aversion in the insurance decisions.
|Item Type:||Paper (Discussion Paper)|
|Keywords:||Risk aversion, Medicare Part D, heterogeneous preferences, insurance demand, survey design|
Economics > Discussion Papers in Economics
Economics > Chairs > Chair of Empirical Economics
|Subjects:||300 Social sciences > 330 Economics|
|JEL Classification:||D03, D81, H51, I1|
|Deposited On:||09. Feb 2012 11:21|
|Last Modified:||16. Apr 2014 07:03|
Abaluck, J. T. and J. Gruber (2011a): “Heterogeneity in Choice Inconsistencies among the Elderly: Evidence from Prescription Drug Plan Choice.” American Economic Review, Papers and Proceedings, 101, 377–381.
Abaluck, J. T. and J. Gruber (2011b): “Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program.” American Economic Review, 101, 1180–1210.
Anderson, L. R., and J. M. Mellor (2008): “Predicting Health Behaviors with an Experimental Measure of Risk Preference.” Journal of Health Economics, 27, 1260-1274. Barsky, R. B., F. T. Juster, M. S. Kimball, and M. D.
Shapiro (1997): “Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study.” Quarterly Journal of Economics, 112(2), 537-579.
Croson, R., and U. Gneezy (2009): “Gender Differences in Risk Taking.” Journal of Economic Literature, 47(2), 1-27.
Dohmen, T., A. Falk, D. Huffman, U. Sunde, J. Schupp, and G. G. Wagner (2011): “Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences.” Journal of the European Economic Association, forthcoming.
Donkers, B., B. Melenberg, and A. Van Soest (2001): “Estimating Risk Attitudes using Lotteries: A Large Sample Approach.” The Journal of Risk and Uncertainty, 22(2), 165-195.
Duggan, M., P. Healy, and F. Scott Morton (2008): “Providing Prescription Drug Coverage to the Elderly: America’s Experiment with Medicare Part D.” Journal of Economic Perspectives, 22(4), 69-92.
Duggan, M., and F. Scott Morton (2010): “The Effect of Medicare Part D on Pharmaceutical Prices and Utilization.” American Economic Review, 100(1), 590-607.
Eckel, C. C., and P. J. Grossman (2008): “Men, Women, and Risk Aversion: Experimental Evidence.” Handbook of Experimental Economics Results, Vol. 1, Ch.113, 1061-1072.
Finkelstein, A. (2010): Comment on “Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans.” In: D. A. Wise, ed., Research Findings in the Economics of Aging, Chicago and London: Chicago University Press, 481-484.
Guiso, L., and M. Paiella (2006): “The Role of Risk Aversion in Predicting Individual Behavior.” In P. A. Chiappori and C. Gollier, ed., Insurance: Theoretical Analysis and Policy Implications, MIT Press.
Halek, M., and J. G. Eisenhauer (2001): “Demography of Risk Aversion.” Journal of Risk and Insurance, 68(1), 1-24.
Hartog, J., A. Ferrer-I-Carbonell, and N. Jonkers (2002): “Linking Measured Risk Aversion to Individual Characteristics.” Kyklos, 55(1), 3-26.
Heiss, F., A. Leive, D. Mc Fadden, and J. Winter (2012): “Plan selection in Medicare Part D: Evidence from administrative data.” Paper presented at the Annual Meeting of the American Economic Association, Chicago, IL.
Heiss, F., D. Mc Fadden, and J. Winter (2006): “Who Failed to Enroll in Medicare Part D, and Why? Early Results.” Health Affairs, 2006, 25, w344-w354.
Heiss, F., D. Mc Fadden, and J. Winter (2010): “Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans.” In: D. A. Wise, ed., Research Findings in the Economics of Aging, Chicago and London: Chicago University Press, 413-481.
Heiss, F., D. McFadden, and J. Winter (2011): The demand for Medicare Part D prescription drug coverage: Evidence from four waves of the Retirement Perspectives Survey. In D. A. Wise (Ed.), Explorations in the Economics of Aging, 159–182. Chicago and London: Chicago University Press.
Hershey, J. C., H. C. Kunreuther, and P. J. H. Schoemaker (1982): “Sources of Bias in Assessment Procedures for Utility Functions.” Management Science, 28(8), 936-954.
Holt, C. A., and S. K. Laury (2002): “Risk Aversion and Incentive Effects.” American Economic Review, 92(5), 1644-55.
Kahneman, D., and A. Tversky (1979): “Prospect Theory: An Analysis of Decision Under Risk.” Econometrica, 47, 263-291.
Ketcham, J. D., C. Lucarelli, E. J. Miravete, and M. C. Roebuck (2011): Sinking, swimming, or learning to swim in Medicare Part D. American Economic Review, forthcoming.
Kimball, M. S., C. R. Sahm, M. D. Shapiro (2008): “Imputing Risk Tolerance from Survey Response.” Journal of the American Statistical Association, 103(483), 1028-1038.
Kling, J. R., S. Mullainathan, E. Shafir, L. Vermeulen, and M. V. Wrobel (2011): Comparison friction: Experimental evidence from Medicare drug plans. Quarterly Journal of Economics, forthcoming.
Levy, H., and D. Weir (2010): “Take-up of Medicare Part D: Results from the Health and Retirement Study.” Journal of Gerontology: Social Sciences, 65B(4), 492-501.
Picone, G., F. Sloan, and D. Taylor (2004): “Effects of Risk and Time Preference and Expected Longevity on Demand for Medical Tests.” Journal of Risk and Uncertainty, 28(1), 39-53.
Schubert, R., M. Brown, M. Gysler, and H. W. Brachinger (1999): “Financial Decision-Making: Are Women Really More Risk-Averse?” AEA Papers and Proceedings, 89(2), 381-385. Spinnewijn, J. (2009): “Insurance and Perceptions: How to Screen Optimists and Pessimists.” mimeo.
Tversky, A., and D. Kahneman (1992): “Advances in Prospect Theory: Cumulative Representation of Uncertainty.” Journal of Risk and Uncertainty, 5, 297-323.
Van der Pol, M., and M. Ruggeri (2008): “Is risk attitude specific within the health domain?” Journal of Health Economics, 27, 706-717.
Wakker, P. P., D. R. M. Timmermans, I. Machielse (2007): “The Effects of Statistical Information on Risk and Ambiguity Attitudes, and on Rational Insurance Decisions.” Management Science, 53(11), 1770–1784.
Winter, J., R. Balza, F. Caro, F. Heiss, B.-H. Jun, R. Matzkin, and D. McFadden (2006): “Medicare Prescription Drug Coverage: Consumer Information and Preferences.” Proceedings of the National Academy of Sciences of the United States of America, 103(20), 7929-7934.