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Incentive and Selection Effects of Medigap Insurance on Inpatient Care

Author

Listed:
  • Valentino Dardanoni

    (Dipartimento SEAF, Università di Palermo)

  • Paolo Li Donni

    (Dipartimento SEAF, Università di Palermo)

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. On the other hand, there seems to be very significant selection when one conditions only on variables used by Medigap insurers, with the presence of both adversely and advantageously selected individuals, stemming from the multidimensional nature of residual heterogeneity.

Suggested Citation

  • Valentino Dardanoni & Paolo Li Donni, 2012. "Incentive and Selection Effects of Medigap Insurance on Inpatient Care," EIEF Working Papers Series 1203, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2012.
    • Handle: RePEc:eie:wpaper:1203
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    References listed on IDEAS

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    Cited by:

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    4. Keane, Michael & Stavrunova, Olena, 2016. "Adverse selection, moral hazard and the demand for Medigap insurance," Journal of Econometrics, Elsevier, vol. 190(1), pages 62-78.
    5. Renate Lange & Jörg Schiller & Petra Steinorth, 2017. "Demand and Selection Effects in Supplemental Health Insurance in Germany," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(1), pages 5-30, January.
    6. Sebastian Panthöfer, 2016. "Risk Selection under Public Health Insurance with Opt‐Out," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1163-1181, September.
    7. Ko, Hansoo, 2020. "Moral hazard effects of supplemental private health insurance in Korea," Social Science & Medicine, Elsevier, vol. 265(C).
    8. Valentino Dardanoni & Paolo Donni, 2016. "The welfare cost of unpriced heterogeneity in insurance markets," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 998-1028, November.
    9. Li Donni, P., 2010. "Risk Preference Heterogeneity And Multiple Demand For Insurance," Health, Econometrics and Data Group (HEDG) Working Papers 10/17, HEDG, c/o Department of Economics, University of York.
    10. Jiang, Yawen & Ni, Weiyi, 2020. "Impact of supplementary private health insurance on hospitalization and physical examination in China," China Economic Review, Elsevier, vol. 63(C).
    11. Forcina, Antonio, 2017. "A Fisher-scoring algorithm for fitting latent class models with individual covariates," Econometrics and Statistics, Elsevier, vol. 3(C), pages 132-140.
    12. Gang Chen & Gordon Liu & Fei Xu, 2014. "The Impact of the Urban Resident Basic Medical Insurance on Health Services Utilisation in China," PharmacoEconomics, Springer, vol. 32(3), pages 277-292, March.
    13. Xiaoqi Zhang & Yi Chen & Yi Yao, 2021. "Dynamic information asymmetry in micro health insurance: implications for sustainability," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 468-507, July.
    14. William Nganje & Kwame Asiam Addey, 2019. "Health Uninsurance in rural America: a partial equilibrium analysis," Health Economics Review, Springer, vol. 9(1), pages 1-15, December.
    15. Vincenzo Atella & Alberto Holly & Alessandro Mistretta, 2016. "Disentangling Adverse Selection, Moral Hazard and Supply Induced Demand: An Empirical Analysis of The Demand For Healthcare Services," CEIS Research Paper 389, Tor Vergata University, CEIS, revised 31 Oct 2018.
    16. Preety Srivastava & Gang Chen & Anthony Harris, 2017. "Oral Health, Dental Insurance and Dental Service use in Australia," Health Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 35-53, January.
    17. Renate Lange & Jörg Schiller & Petra Steinorth, 2015. "Demand and Selection Effects in Supplemental Health Insurance in Germany," SOEPpapers on Multidisciplinary Panel Data Research 757, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Paolo Li Donni & Juan Rodríguez & Pedro Rosa Dias, 2015. "Empirical definition of social types in the analysis of inequality of opportunity: a latent classes approach," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(3), pages 673-701, March.

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    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I10 - Health, Education, and Welfare - - Health - - - General

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