Disentangling incentives effects of insurance coverage from adverse selection in the case of drug expenditure: a finite mixture approach.
This paper takes a finite mixture approach to model heterogeneity in incentive and selection effects of drug coverage on total drug expenditure among the Medicare elderly US population. Evidence is found that the positive drug expenditures of the elderly population can be decomposed into two groups different in the identified selection effects and interpreted as relatively healthy with lower average expenditures and relatively unhealthy with higher average expenditures, accounting for approximately 25 and 75% of the population, respectively. Adverse selection into drug insurance appears to be strong for the higher expenditure component and weak for the lower expenditure group.
Munkin
Murat K
MK
Department of Economics, University of South Florida, 4202 East Fowler Avenue, Tampa, FL 33620, USA. mmunkin@coba.usf.edu
Trivedi
Pravin K
PK
D000368:Aged; D001499:Bayes Theorem; D004363:Drug Utilization / Q000191:economics*; D005260:Female; D006801:Humans; D008297:Male; D054524:Medicare Part D / Q000191:economics*; D017059:Models, Econometric; D009042:Motivation; D011306:Prescription Fees / Q000706:statistics & numerical data*; D012052:Reimbursement, Incentive; D014481:United States