Working Papers

Working Paper
Kreider, Amanda, Timothy Layton, Mark Shepard, and Jacob Wallace. Working Paper. “Adverse Selection and Network Design Under Regulated Plan Prices: Evidence from Medicaid”. NBER WP #30719 Abstract
Health plans for the poor increasingly limit access to specialty hospitals. We investigate the role of adverse selection in generating this equilibrium among private plans in Medicaid. Studying a network change, we find that covering a top cancer hospital causes severe adverse selection, increasing demand for a plan by 50% among enrollees with cancer versus no impact for others. Medicaid’s fixed insurer payments make offsetting this selection, and the contract distortions it induces, challenging, requiring either infeasibly high payment rates or near-perfect risk adjustment. By contrast, a small explicit bonus for covering the hospital is sufficient to make coverage profitable
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Submitted
Pakes, Ariel, Jack Porter, Mark Shepard, and Sophie Calder-Wang. Working Paper. “Unobserved Heterogeneity, State Dependence, and Health Plan Choices”. NBER WP #29025 Abstract
We provide a new method to analyze discrete choice models with state dependence and individual-by-product fixed effects, and use it to analyze consumer choices in a policy-relevant environment (a subsidized health insurance exchange). Moment inequalities are used to infer state dependence from consumers' switching choices in response to changes in product attributes. We infer much smaller switching costs on the health insurance exchange than is inferred from standard logit and/or random effects methods. A counterfactual policy evaluation  illustrates that the policy implications of this difference can be substantive.
Draft (PDF)
Submitted
Incomplete health insurance enrollment is a persistent U.S. challenge despite large subsidies. We ask whether hassles built into enrollment systems matter for insurance take-up and targeting. Studying removal of an auto-enrollment policy, we find that a small hassle – a requirement to actively select a health plan to enroll – reduces take-up by 33%, a major impact equivalent to $470 (57%) higher enrollee premiums. Hassles differentially screen out younger, healthier, and poorer people – groups with both low value and costs of insurance. We show that this value-cost correlation – a standard feature of insurance, where risk drives both – may undermine the classic rationale for ordeals' favorable targeting.
Draft (PDF) Slides (PDF) Summary and Policy Brief (PDF)
Coverage: HKS Insights