Incentive and Selection Effects of Medigap Insurance on Inpatient Care

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17 Citations (Scopus)

Abstract

The Medicare program, which provides insurance coverage to the elderly in the United States, does not protect them fully against high out-of-pocket costs. For this reason private supplementary insurance, named Medigap, has been available to cover Medicare gaps. This paper studies how Medigap affects the utilization of inpatient care, separating the incentive and selection effects of supplementary insurance. For this purpose, we use two alternative estimation methods: a standard recursive bivariate probit and a discrete multivariate finite mixture model. We find that estimated incentive effects are modest and quite similar across models. There seems to be very significant selection, with the presence of both adversely and advantageously selected individuals, stemming from the multidimensional nature of residual heterogeneity.
Original languageEnglish
Pages (from-to)457-470
Number of pages14
JournalJournal of Health Economics
Volume31
Publication statusPublished - 2012

All Science Journal Classification (ASJC) codes

  • Health Policy
  • Public Health, Environmental and Occupational Health

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