Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance
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Mark V. Pauly
This paper investigates a possible predictor of adverse selection problems in unsubsidized stand-alone prescription drug insurance: the persistence of an individual’s high spending over multiple years. Using Medstat claims data and data from the Medicare Survey of Current Beneficiaries, we find that persistence is much higher for outpatient drug expenses than for other categories of medical expenses. We then use these estimates to develop a simple and intuitive model of adverse selection in competitive insurance markets and show that this high relative persistence makes it unlikely that unsubsidized drug insurance can be offered for sale, even with premiums partially risk adjusted, without a probable adverse selection death spiral. We show that this outcome can be avoided if drug coverage is bundled with other coverage, and we briefly discuss the need either for comprehensive coverage or generous subsidies if adverse selection is to be avoided in private and Medicare insurance markets.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Article
- Introduction to Frontiers in Health Policy Research, Volume 7
- Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand
- Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance
- Disability Forecasts and Future Medicare Costs
- Benefit Plan Design and Prescription Drug Utilization Among Asthmatics: Do Patient Copayments Matter?
- An Economic Analysis of Health Plan Conversions: Are They in the Public Interest?
Artikel in diesem Heft
- Article
- Introduction to Frontiers in Health Policy Research, Volume 7
- Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand
- Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance
- Disability Forecasts and Future Medicare Costs
- Benefit Plan Design and Prescription Drug Utilization Among Asthmatics: Do Patient Copayments Matter?
- An Economic Analysis of Health Plan Conversions: Are They in the Public Interest?
