Standard theory suggests that optimal consumer cost-sharing in health insurance increases with the price elasticity of demand, yet publicly-provided drug coverage typically involves uniform cost-sharing across drugs. We investigate how private drug plans set cost-sharing in the context of...

A ubiquitous form of government intervention in insurance markets is to provide compulsory, but partial, public insurance coverage and to allow voluntary purchases of supplementary insurance on the private market. Yet we know little about the effects of such programs on total insurance coverage...

Rewarding inventors with inefficient monopoly power has long been regarded as the price of encouraging innovation. Public prescription drug insurance escapes that trade-off and achieves an elusive goal: lowering static deadweight loss, while simultaneously encouraging dynamic investments in...

Drug pricing in the U.S. is a persistently vexing policy problem. While there is agreement among many policy analysts that supra competitive prices are necessary to promote innovation; significant disagreements arise over how much pricing discretion prescription drug manufacturers should be...

We study the demand response to non-linear price schedules using data on insurance contracts and prescription drug purchases in Medicare Part D. Consistent with a static response of drug use to price, we document bunching of annual drug spending as individuals enter the famous "donut hole,"...

We re-present and re-examine the analysis from the famous RAND Health Insurance Experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending. We begin by summarizing the experiment and its core findings in a manner that would be standard in the current...

In recent years, the increased use of “big data” and statistical techniques to score potential transactions has transformed the operation of insurance and credit markets. In this paper, we observe that these widely-used scores are statistical objects that constitute a one-dimensional summary...

A large literature in empirical public finance relies on “bunching” to identify a behavioral response to non-linear incentives and to translate this response into an economic object to be used counterfactually. We conduct this type of analysis in the context of prescription drug insurance...

This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more...

This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they...