Consumer behavior and health insurance among two populations: Elderly Medicare beneficiaries and low -income parents.

Abstract

The first study of this dissertation examines the determinants of Medicare supplemental coverage choice, focusing on the relationship between Medigap premiums and supplemental coverage decisions of elderly Medicare beneficiaries across geographic markets. Using data from the Community Tracking Study (1998--99) combined with Medigap premium data, multinomial logit results suggest that Medigap premiums have a positive and highly statistically significant effect on Medicare HMO participation. Medigap premiums also have a marginally significant and positive effect on Medicaid participation, but do not drive individuals from supplemental coverage altogether. Implied elasticity estimates indicate that Medigap premiums have a much larger effect on the likelihood of Medicare HMO participation (cross-price elasticity around 1) than do Medicare HMO premiums. The results reveal how Medigap premiums influence coverage decisions and highlight important connections between Medicare supplemental alternatives. The second study develops a conceptual framework for and describes existing literature on pent-up demand for medical care. If previously uninsured individuals exhibit pent-up demand after obtaining coverage, program expansions and reform efforts could face large start-up costs. I present a conceptual framework that identifies several types of pent-up demand and suggests how they might be measured empirically. Although much research has documented utilization differences between insured and uninsured persons, fewer studies have examined utilization patterns of newly enrolled individuals across time. Existing evidence for pent-up demand is mixed and few studies have tried to disentangle it from moral hazard and adverse selection. The third study presents an empirical analysis of pent-up demand, modeling utilization patterns of low-income parents who obtain coverage from a Medicaid HMO. Although the program represents a local initiative, it resembles efforts in some states to cover parents of publicly-insured children. Using self-reported utilization data from a telephone survey, results provide some evidence for pent-up demand for overall health care utilization in the first six months of enrollment, relative to the second six. However, intensity of use (i.e., number of visits) does not differ over this time. I also examine utilization before and after enrollment and find strong evidence for higher utilization after enrollment, both in terms of its likelihood as well as its intensity.