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Beneficiary price sensitivity in the Medicare prescription drug plan market

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  • Austin B. Frakt
  • Steven D. Pizer

Abstract

The Medicare stand‐alone prescription drug plan (PDP) came into existence in 2006 as part of the Medicare prescription drug benefit. It is the most popular plan type among Medicare drug plans and large numbers of plans are available to all beneficiaries. In this article we present the first analysis of beneficiary price sensitivity in the PDP market. Our estimate of elasticity of enrollment with respect to premium, −1.45, is larger in magnitude than has been found in the Medicare HMO market. This high degree of beneficiary price sensitivity for PDPs is consistent with relatively low product differentiation, low fixed costs of entry in the PDP market, and the fact that, in contrast to changing HMOs, beneficiaries can select a PDP without disrupting doctor–patient relationships. Published in 2009 by John Wiley & Sons, Ltd.

Suggested Citation

  • Austin B. Frakt & Steven D. Pizer, 2010. "Beneficiary price sensitivity in the Medicare prescription drug plan market," Health Economics, John Wiley & Sons, Ltd., vol. 19(1), pages 88-100, January.
    • Handle: RePEc:wly:hlthec:v:19:y:2010:i:1:p:88-100
    DOI: 10.1002/hec.1451
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    References listed on IDEAS

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    5. Steven D. Pizer & Austin B. Frakt & Roger Feldman, 2008. "Predicting risk selection following major changes in medicare," Health Economics, John Wiley & Sons, Ltd., vol. 17(4), pages 453-468, April.
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    Cited by:

    1. Kesternich, Iris & Heiss, Florian & McFadden, Daniel & Winter, Joachim, 2013. "Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D," Journal of Health Economics, Elsevier, vol. 32(6), pages 1313-1324.
    2. Andrew Stocking & James Baumgardner & Melinda Buntin & Anna Cook, 2014. "Assessing the Design of the Low-Income Subsidy Program in Medicare Part D: Working Paper 2014-07," Working Papers 49451, Congressional Budget Office.
    3. Austin B. Frakt & Steven D. Pizer & Roger Feldman, 2012. "Should Medicare adopt the Veterans health administration formulary?," Health Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 485-495, May.
    4. Jonas Pendzialek & Dusan Simic & Stephanie Stock, 2016. "Differences in price elasticities of demand for health insurance: a systematic review," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 5-21, January.
    5. Bryan Dowd & Roger Feldman, 2012. "Competition and Health Plan Choice," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 13, Edward Elgar Publishing.

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