Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program

The Medicare Part D Prescription Drug Plan represents the most significant privatization of the delivery of a public insurance benefit in recent history, with dozens of private insurers offering a wide range of products with varying prices and product features; the typical elder had a choice of roughly 40 stand-alone drug plans. In this paper we evaluate the choices of elders across this wide array of Part D options using a unique data set of prescription drug claims matched to information on the characteristics of choice sets. We first document that the vast majority of elders are choosing plans that are not on the "efficient portfolio" of plan choice in the sense that an alternative plan offers better risk protection at a lower cost. We then estimate several discrete choice models to document three dimensions along which elders are making choices which are inconsistent with optimization under full information: elders place much more weight on plan premiums than they do on expected out of pocket costs; they place almost no value on variance reducing aspects of plans; and they value plan financial characteristics beyond any impacts on their own financial expenses or risk.These findings are robust to a variety of specifications and econometric approaches. We develop an "adjusted" revealed preference approach that combines data from consumer choices with ex ante restrictions on preferences, and find that in a partial equilibrium setting, restricting the choice set to the three lowest average cost options would have likely raised welfare for elders under the program.

Prescription Drug Use under Medicare Part D: A Linear Model of Nonlinear Budget Sets

Medicare Part D enrollees face a complicated decision problem: they must dynamically choose prescription drug consumption in each period given difficult- to-find prices and a non-linear budget set. We use Medicare Part D claims data from 2006-2009 to estimate a flexible model of consumption that accounts for non-linear budget sets, dynamic incentives due to myopia and uncertainty, and price salience. By using variation away from kink points, we are able to estimate structural models with a linear regression of consumption on coverage range prices. We then compare performance under several candidate models of expectations and coverage phase weighting. The estimates suggest small marginal price elasticities and substantial myopia; we also find evidence that salient plan characteristics impact consumption beyond their effect on out-of-pocket prices. A hyperbolic discounting model which allows for salient plan characteristics fits the data well, and outperforms both rational models and alternative behavioral models

Information, decision-making and health

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2011.Cataloged from PDF version of thesis.Includes bibliographical references (p. 151-155).This thesis consists of three essays on information, decision-making and health. All three concern the relationship between the choices consumers would make if they were "fully informed" in an appropriate sense and the choices we actually observe. Chapter 1 considers how we can determine whether consumers are appropriately taking into account health information when they make their food consumption decisions. The fundamental idea is to determine the value of a statistical life (VSL) implicit in food consumption decisions and to compare this value with previous estimates of the VSL. The main positive result is that the VSL estimated from food consumption is about 1/10th as large as estimates from other contexts. I also consider the normative implications under the assumption that VSL estimates from other contexts indicate how individuals would behave if they were "fully informed" and discuss what additional evidence might support such an assumption. Chapter 2, co-authored with Jonathan Gruber, performs an analogous exercise in the case of health care plans. Where Chapter 1 makes the normative assumption that consumers should value years of life equally regardless of where they come from (e.g. eating healthier foods or reducing risk of on-the-job death), Chapter 2 makes the normative assumption that consumers should value a dollar of cost savings equivalently whether it comes through premiums or out of pocket costs. This restriction can then be used to evaluate whether consumers are choosing appropriately. The chapter studies this question in the context of Medicare Part D Prescription Drug Plan, the most significant privatization of the delivery of a public insurance benefit in recent history. Chapter 3 attempts to consider the circumstances in which the partial equilibrium welfare analyses performed in parts 1 and 2 extend to a general equilibrium setting in which prices and product characteristics respond endogenously to changes in demand. In particular, Chapter 3 derives conditions under which more information leads to welfare gains in general equilibrium taking into account the endogenous response of firms' pricing and product quality decisions.by Jason Abaluck.Ph.D

The Determinants of Productivity in Medical Testing: Intensity and Allocation of Care

A large body of research has investigated whether physicians overuse care. There is less evidence on whether, for a fixed level of spending, doctors allocate resources to patients with the highest expected returns. We assess both sources of inefficiency exploiting variation in rates of negative imaging tests for pulmonary embolism. We document enormous across-doctor heterogeneity in testing conditional on patient population, which explains the negative relationship between physicians’ testing rates and test yields. Furthermore, doctors do not target testing to the highest risk patients, reducing test yields by one third. Our calibration suggests misallocation is more costly than overuse

Normalizing Community Mask-Wearing: A Cluster Randomized Trial in Bangladesh

Background: A growing body of scientific evidence suggests that face masks can slow the spread of COVID-19 and save lives, but mask usage remains low across many parts of the world, and strategies to increase mask usage remain untested and unclear. Methods: We conducted a cluster-randomized trial of community-level mask promotion in rural Bangladesh involving 341,830 adults in 600 villages. We employed a series of strategies to promote mask usage, including free household distribution of surgical or cloth masks, distribution and promotion at markets and mosques, mask advocacy by Imams during Friday prayers, role modeling by local leaders, promoters periodically monitoring passers-by and reminding people to put on masks, village police accompanying those mask promoters, providing monetary rewards or certificates to villages if mask-wearing rate improves, public signaling of mask-wearing via signage, text message reminders, messaging emphasizing either altruistic or self-protection motives for mask-wearing, and extracting verbal commitments from households. The primary objective was to assess which of these interventions would increase proper (covering nose and mouth) wearing of face masks, and secondarily, whether mask promotion unintentionally creates moral hazard and decreases social distancing. This analysis is part of larger study evaluating the effect of mask-wearing on transmission of SARS-CoV-2. Results: There were 64,937 households in the intervention group and 64,183 households in the control group; study recruitment has ended. In the control group, proper mask-wearing was practiced by 13% of those observed across the study period. Free distribution of masks along with role modeling by community leaders produced only small increases in mask usage during pilot interventions. Adding periodic monitoring by mask promoters to remind people in streets and public places to put on the masks we provided increased proper mask-wearing by 29.0 percentage points (95% CI: 26.7% - 31.3%). This tripling of mask usage was sustained over all 10 weeks of surveillance, which includes a period after intervention activities ended. Physical distancing, measured as the fraction of individuals at least one arm’s length apart, also increased by 5.2 percentage points (95% CI: 4.2%-6.3%). Beyond the core intervention package comprised of free distribution and promotion at households/mosques/markets, leader endorsements plus periodic monitoring and reminders, several elements had no additional effect on mask wearing, including: text reminders, public signage commitments, monetary or non-monetary incentives, altruistic messaging or verbal commitments, or village police accompanying the mask promoters (the last not cross-randomized, but assessed in panel data). No adverse events were reported during the study period. Conclusions: Our intervention demonstrates a scalable and cost-effective method to promote mask adoption and save lives, and identifies a precise combination of intervention activities that were necessary. Comparisons between pilots shows that free mask distribution alone is not sufficient to increase mask-wearing, but adding periodic monitoring in public places to remind people to wear the distributed masks had large effects on behavior. The absence of any further effect of the village police suggests that the operative mechanism is not any threat of formal legal sanctions, but shame and people’s aversion to a light informal social sanction. The persistence of effects for 10 weeks and after the end of the active intervention period, as well as increases in physical distancing, all point to changes in social norms as a key driver of behavior change. Our cross-randomizations suggest that improved mask-wearing norms can be achieved without incentives that require costly monitoring, that aesthetic design choices and colors can influence mask-wearing, and that surgical masks with a substantially higher filtration efficiency can be a cost-effective alternative to cloth masks (1/3 the cost) and are equally or more likely to be worn. Implementing these interventions – including distribution of free masks, and the information campaign, reminders, encouragement – cost $2.30-$3.75 per villager, or between $8 and$13 per person adopting a mask. Combined with existing estimates of the efficacy of masks in preventing COVID-19 deaths, this implies that the intervention cost $28,000-$66,000 per life saved. Beyond reducing the transmission of COVID-19, mask distribution is likely to be a cost-effective strategy to prevent future respiratory disease outbreaks

The Impact of Community Masking on COVID-19: A Cluster Randomized Trial in Bangladesh

Background: Mask usage remains low across many parts of the world during the COVID- 19 pandemic, and strategies to increase mask-wearing remain untested. Our objectives were to identify strategies that can persistently increase mask-wearing and assess the impact of increasing mask-wearing on symptomatic SARS-CoV-2 infections. Methods: We conducted a cluster-randomized trial of community-level mask promotion in rural Bangladesh from November 2020 to April 2021 (N=600 villages, N=342,126 adults). We cross-randomized mask promotion strategies at the village and household level, including cloth vs. surgical masks. All intervention arms received free masks, information on the importance of masking, role modeling by community leaders, and in-person reminders for 8 weeks. The control group did not receive any interventions. Neither participants nor field staff were blinded to intervention assignment. Outcomes included symptomatic SARS-CoV-2 seroprevalence (primary) and prevalence of proper mask-wearing, physical distancing, and symptoms consistent with COVID-19 (secondary). Mask-wearing and physical distancing were assessed through direct observation at least weekly at mosques, markets, the main entrance roads to villages, and tea stalls. At 5 and 9 weeks follow-up, we surveyed all reachable participants about COVID-related symptoms. Blood samples collected at 10-12 weeks of follow-up for symptomatic individuals were analyzed for SARS-CoV-2 IgG antibodies. Results: There were 178,288 individuals in the intervention group and 163,838 individuals in the control group. The intervention increased proper mask-wearing from 13.3% in control villages (N=806,547 observations) to 42.3% in treatment villages (N=797,715 observations) (adjusted percentage point difference = 0.29 [0.27, 0.31]). This tripling of mask usage was sustained during the intervention period and two weeks after. Physical distancing increased from 24.1% in control villages to 29.2% in treatment villages (adjusted percentage point difference = 0.05 [0.04, 0.06]). After 5 months, the impact of the intervention faded, but mask-wearing remained 10 percentage points higher in the intervention group. The proportion of individuals with COVID-like symptoms was 7.62% (N=13,273) in the intervention arm and 8.62% (N=13,893) in the control arm. Blood samples were collected from N=10,952 consenting, symptomatic individuals. Adjusting for baseline covariates, the intervention reduced symptomatic seroprevalence by 9.3% (adjusted prevalence ratio (aPR) = 0.91 [0.82, 1.00]; control prevalence 0.76%; treatment prevalence 0.68%). In villages randomized to surgical masks (n = 200), the relative reduction was 11.2% overall (aPR = 0.89 [0.78, 1.00]) and 34.7% among individuals 60+ (aPR = 0.65 [0.46, 0.85]). No adverse events were reported. Conclusions: Our intervention demonstrates a scalable and effective method to promote mask adoption and reduce symptomatic SARS-CoV-2 infections. Trial registration: ClinicalTrials.gov Identifier: NCT04630054 Funding: GiveWell.or

Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Reply

We explore the in- and out-of-sample robustness of tests for choice inconsistencies based on parameter restrictions in parametric models, focusing on tests proposed by Ketcham, Kuminoff, and Powers (2016). We argue that their nonparametric alternatives are inherently conservative with respect to detecting mistakes. We then show that our parametric model is robust to KKP's suggested specification checks, and that comprehensive goodness of fit measures perform better with our model than the expected utility model. Finally, we explore the robustness of our 2011 results to alternative normative assumptions highlighting the role of brand fixed effects and unobservable characteristics

Heterogeneity in Choice Inconsistencies among the Elderly: Evidence from Prescription Drug Plan Choice

This paper investigates the degree to which choice inconsistencies documented in the context of Medicare Part D plan choice vary across consumers and geographic regions. Our main finding is that there is surprisingly little variation: regardless of age, gender, predicted drug expenditures or the predictability of drug demand consumers underweight out of pocket costs relative to premiums and fail to consider the individualized consequences of plan characteristics; as a result, they frequently choose plans which are dominated in the sense that an alternative plan provides better risk protection at a lower cost. We find limited evidence that the sickest individuals had more difficulty with plan choice, and we document that much of the variation in potential cost savings across states comes from variation in choice sets, not variation in consumers ability to choose.