The Effect of Benefits, Premiums, and Heath Risk on Health Plan Choice in the Medicare Program

Department of Health Policy and Management, Emory University, Atlanta, GA 30322, USA.
Health Services Research (Impact Factor: 2.78). 09/2004; 39(4 Pt 1):847-64. DOI: 10.1111/j.1475-6773.2004.00261.x
Source: PubMed


To estimate the effect of Medicare+Choice (M+C) plan premiums and benefits and individual beneficiary characteristics on the probability of enrollment in a Medicare+Choice plan.
Individual data from the Medicare Current Beneficiary Survey were combined with plan-level data from Medicare Compare.
Health plan choices, including the Medicare+Choice/Fee-for-Service decision and the choice of plan within the M+C sector, were modeled using limited information maximum likelihood nested logit.
Premiums have a significant effect on plan selection, with an estimated out-of-pocket premium elasticity of -0.134 and an insurer-perspective elasticity of -4.57. Beneficiaries are responsive to plan characteristics, with prescription drug benefits having the largest marginal effect. Sicker beneficiaries were more likely to choose plans with drug benefits and diabetics were more likely to pick plans with vision coverage.
Plan characteristics significantly impact beneficiaries' decisions to enroll in Medicare M+C plans and individuals sort themselves systematically into plans based on individual characteristics.

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Available from: Adam J Atherly,
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    • "choice 4 (e.g. Strombom et al., 2002; Atherly et al., 2004; Schut and Hassink, 2002; Buchmueller, 2006; Tamm et al., 2007; Frank and Lamiraud, 2009; Buchmueller et al., 2013; Schmitz and Ziebarth, 2011; Wuppermann et al., 2014 "
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    • "In another study using UC employees, Strombom et al. (2002) calculate " insurer perspective own-price elasticities " of health plans and find that a monthly premium increase of $5 decreases the plans market share by between 1.2 and 3.7 percent. Atherly et al. (2004) study the Medicare+Choice market and calculate out-of pocket premium elasticities of -0.134 and insurer perspective elasticities of -4.6. Buchmueller (2006) focus on a sample of retirees 60 and calculates out-of-pocket premium elasticities of between -0.2 and -0.3, implying that a health plan would loose 4 to 8 percent of its enrollees it if increases monthly contributions by $10. "
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