Inattention and Switching Costs as Sources of Inertia in Health Insurance

Date:

Friday, 13 December 2019

Time:

10.00am – 11.00am

Venue:

Conference Rooms 1 and 2, Level 10
Tahir Foundation Building (MD1)
Saw Swee Hock School of Public Health
National University of Singapore
12 Science Drive 2, S(117549)

Synopsis:

Consumers’ health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia.

About the speaker:

Dr Zhou is a research assistant professor at the USC School of Pharmacy. Prior to becoming a professor, she was a postdoctoral fellow at the USC Schaeffer Center, with Daniel McFadden and Dana Goldman. She graduated with a PhD in economics from the University of Southern California in 2014. Her dissertation studied applications of Markov switching models in economics. She works on health policy, health economics and patient outcomes including consumer inertia in Medicare Part D, the impact of prior authorization on drug consumption and patient outcomes, and cost-sharing in in Medicare Part D.