We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare...

"Private insurance for prescription drugs is characterized by two regimes: flat copayments and variable co-insurance. We develop a simple model to show that patient compliance is lower under coinsurance due to uncertainty in cost-sharing. Empirically, we derive comparable models for compliance...