I examine the effects of public catastrophic insurance programs on enrollment and selection in private health insurance to supplement Medicare. Using variation over time in the availability and generosity of these programs I show that public catastrophic insurance crowds-in private insurance coverage for individuals in the middle of the health distribution, while reducing insurance for higher-risk individuals. This effects appears to arise from reductions in private insurance coverage following large positive and negative health shocks. The selective crowd-out of individuals in worse health induces advantageous selection in Medigap, one of two types of supplementary private insurance, and leads to lower insurance premiums.
Ex ante, like ex-post, moral hazard reduces the efficiency of the insurance market. I use exogenous variation in risk protection associated with public catastrophic health insurance programs to test for ex-ante moral hazard. Using the introduction of and changes in these programs, I find large decreases in self-protection as the public program provides greater risk protection. Ex-ante moral hazard is stronger for women than for men and affects a variety of investments, including smoking, obesity, and cancer screening. Differences by gender in ex-ante moral hazard are consistent with greater returns to self-protection for women than for men.
Health insurance benefit mandates are believed to have adverse effects on the labor market, but efforts to document such effects for mental health parity mandates have had limited success. I show that one reason for this failure is that the association between parity mandates and labor market outcomes vary with mental distress. Accounting for this heterogeneity, I find adverse labor market effects for non-distressed individuals, but favorable effects for more distressed individuals. On net, I conclude that the mandates are, at worst, slightly welfare reducing.