“Strategic Formulary Design in Medicare Part D Plans” with Kosali Simon, Indiana University

ISPS HEALTH POLICY SEMINAR (Joint with the Industrial Organization Seminar and Labor/Public Economics Workshop)

Abstract: The design of Medicare Part D causes most Medicare beneficiaries to receive fragmented health insurance, whereby prescription drugs and other medical care are covered by separate insurance plans. Fragmentation of insurance plans is potentially inefficient since separate insurers maximize profits over only one component of healthcare spending, despite many complementarities and substitutabilities between types of healthcare. Fragmentation of some plans but not others can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formulary designs to induce enrollment by patients who are profitable under Parts A & B, while stand-alone drug plans have no such incentive. We study whether the design of insurance plans in Medicare Part D reflects these two differences in incentives using data on the universe of Part D plan formularies, drug prices, and Medicare claims data.

Speaker: Dr. Kosali Simon is the 1948 Herman B. Wells Endowed Professor in the School of Public and Environmental Affairs (SPEA) at Indiana University, Bloomington. Simon is a nationally known health economist who specializes in applying economic analysis in the context of health insurance and health care policy. Her current main research focus is the impact of the Affordable Care Act on healthcare and labor market outcomes. She is also active in national leadership roles in her profession, serving on several boards and in editorial positions. Dr. Simon joined SPEA as a professor in 2010. A summary of her recent research appears in the 2016 National Bureau of Economic Research Reporter.

This seminar is being held jointly with the Labor/Public Economics Workshop and the Industrial Organization Seminar series at Yale University.