health plan choice using a unique panel dataset of health plan choices and personal characteristics of employees at a single firm this paper provides estimates of price elasticities for health insurance plans in a managed competition setting estimated price elasticities are larger in absolute value than most previous estimates and the magnitude of the price elasticity suggests that there is a place for price competition in this market we also find evidence of transition costs in switching health plans for older and less healthy employees such differential responses to price may contribute to adverse selection in this market

managed competition and consumer price sensitivity in social health insurance this paper examines whether the introduction of managed competition in dutch social health insurance has resulted in effective price competition among insurance funds we find evidence of limited price competition which may be caused by low consumer price sensitivity using aggregate panel data from all insurance funds over the period 1996 1998 estimated premium elasticities of market share are 0 3 for compulsory coverage and 0 8 for supplementary coverage these elasticities are much smaller than in managed competition settings in us group insurance this may be explained by differences in switching experience and higher search costs associated with individual insurance

the relative effects of local authority financial assistance policies the provision of financial assistance to industry has formed a growing and important part of the economic development policies of many local authorities however assessments of these policies have suffered from a number of drawbacks in particular they have tended to focus on the employment effect of the local authority s assistance policy as a whole and there have been few attempts to isolate the factors bearing on the success of these policies or to compare their effectiveness with schemes pursued by other agencies this paper examines the effect of local authority financial assistance on the operation and employment of establishments over the period 1980 84 using data collected as part of a survey of 201 establishments located in the north east of england these policies are compared with the two major instruments of regional policy regional development grant rdg and regional selective assistance rsa and with national selective assitance nsa different purposes of project are also examined u

the effect of report cards on consumer choice in the health insurance market we test the effect of report cards on consumer choice in the hmo market federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996 exploiting this natural experiment we find that subjective measures of quality and coverage influence plan choices after controlling for plan premiums expected out of pocket expenses and service coverages the effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees we also find evidence that report cards increase the price elasticity of demand for health insurance

the effects of tax increment financing on economic development abstract local governments attempt to influence business location decisions and economic development through use of the property tax tax increment financing tif earmarks property tax revenues that result from growth in assessed valuation the tif revenues are to be used for economic development projects but may also be diverted for other purposes using data for the chicago metropolitan area that includes information on property value growth before and after tif adoption we find evidence that cities that adopt tif grow more slowly than those that do not we test for and reject sample selection bias as an explanation of this finding

how individuals choose health insurance an experimental analysis an individual choosing a health insurance policy faces a complex decision environment where a large set of alternatives differ on a variety of dimensions there is uncertainty and the choice is repeated at least once a year we study decisions and decision strategies in a laboratory experiment where we create a controlled environment that closely mirrors this setting we use an electronic information board that allows to carefully monitor the individual s decision strategy the number of alternatives switching costs and the speed at which health deteriorates are varied across treatments we find that most subjects search is based more on attributes than on policies moreover we find that an increase in the number of alternatives increases decision making time makes subjects consider a lower fraction of the available information makes it more likely that subjects will switch and decreases the quality of their decisions the introduction of positive costs of switching makes people switch less often but improves the quality of their decisions finally if health deteriorates only gradually individuals tend to stick to their current policy too long

demand for health insurance marketplace plans was highly elastic in 2014 2015 abstract a major provision of the affordable care act was the creation of health insurance marketplaces which began operating for the 2014 plan year although enrollment initially grew in these markets enrollment has fallen recently amid insurer exits and rising premiums to better understand these markets we estimate premium elasticity of demand for marketplace plans using within plan premium changes from 2014 to 2015 accounting for state specific trends and simultaneous changes in generosity our preferred estimate implies that a one percent premium increase reduces plan specific enrollment by 1 7 percent we argue that this high elasticity reflects the rapid growth and high churn in this market as well as the high degree of standardization and the availability of many close substitutes

the welfare impact of medicare hmos we estimate the welfare associated with the medicare hmo program now known as medicare choice m c we find that the creation of the m c program resulted in approximately 15 6 billion in consumer surplus and 52 billion in profits from 1993 to 2000 in 2000 dollars this program most likely generated significant net social welfare however we find that consumer surplus is geographically unevenly distributed prescription drug coverage accounts for approximately 45 of the estimated consumer surplus for 2000 consumer surplus increases in the number of plans in a county and most of the increase in welfare is due to increased premium competition

estimating the benefits of job creation from local investment subsidies this paper reviews the application of project appraisal techniques to analysing the cost effectiveness of local investment subsidies advance factory building cost per job measures are shown to be dependent upon the method of assessing the number of jobs created and the assumptions used in evaluating exchequer as well as social costs and benefits if realistic probabilities are adopted about the likelihood of previously unemployed persons obtaining a job other than in the advance factories then such local investment subsidies are not economically viable in exchequer terms local investment subsidies may be justified on cost benefit grounds but even by this criterion the number of subsidy created relative to subsidy diverted jobs is crucial to the decision

switching costs price sensitivity and health plan choice we investigate the extent to which sensitivity to health plan premiums differs across individuals according to characteristics related to the cost of switching plans our results indicate substantial variation in price sensitivity related to expected health care costs younger healthier employees are between two and four times more sensitive to price than employees who are older and who have been recently hospitalized or diagnosed with cancer we also find evidence of status quo bias estimated premium elasticities are significantly higher for new hires than for incumbent employees simulations combining our results with actuarial data illustrate the cost implications of risk related differences in price elasticity

price elasticity and adverse selection in the demand for supplementary health insurance probit regression estimates show the effects of the price of insurance anticipated medical expenditures and other factors on reported decisions about purchasing hypothetically offered supplementary insurance policies the demand estimates can characterize how much supplemental insurance would be purchased under different tax policies affecting health insurance purchases although eliminating the current tax subsidy to insurance is shown to decrease demand the results indicate a substantial demand for supplementary insurance even in the absence of present tax incentives however our results on adverse selection raise concerns about the potential stability of supplemental insurance markets

pricing and welfare in health plan choice premiums in health insurance markets frequently do not reflect individual differences in costs either because consumers have private information or because prices are not risk rated this creates inefficiencies when consumers self select into plans we develop a simple econometric model to study this problem and estimate it using data on small employers we find a welfare loss of 2 11 percent of coverage costs compared to what is feasible with risk rating only about one quarter of this is due to inefficiently chosen uniform contribution levels we also investigate the reclassification risk created by risk rating individual incremental premiums finding only a modest welfare cost

dominated choices and medicare advantage enrollment research in behavioral economics suggests that certain circumstances such as large numbers of complex options or revisiting prior choices can lead to decision errors this paper explores the enrollment decisions of medicare beneficiaries in the medicare advantage ma program during the time period we study 2007 2010 private fee for service pffs plans offered enhanced benefits beyond those of traditional medicare tm without any restrictions on physician networks making tm a dominated choice relative to pffs yet more than three quarters of medicare beneficiaries remained in tm during our study period we analyze the role of status quo bias in explaining this pattern of enrollment our results suggest that status quo bias plays an important role the rate of ma enrollment was significantly higher among new medicare beneficiaries than among incumbents these results illustrate the importance of the choice environment that is in place when enrollees first enter the medicare program

an individual health plan exchange which employees would benefit and why on average us workers fortunate enough to be offered health insurance through their place of work are given a small number of choices 80 percent of firms accounting for 37 percent of workers offered only one plan in 2005 although there are merits of limited choice including lower administrative costs for sponsoring employers and better pooling of risk within a given employee population substantial consumer surplus is forgone by preventing employees from selecting plans that best suit their needs in dafny ho and varela 2010 we build a model to quantify this deadweight loss using data on plan offerings and enrollment for 800 large us firms in 139 geographic markets over the period 1998 2006 we estimate a model of consumer preferences for characteristics of health plans we use the parameters of that model to predict employee choices under different hypothetical scenarios of expanded choice assuming employers total outlays for health insurance remain constant and plans are made available to new enrollees at large group rates we quantify those gains for each employee group year we observe for example big box retailer s employees in houston in 2003 and conclude these gains are sizable compared to average premiums we estimate that employees would be willing to forgo ten to 40 percent or more of their employer subsidies for the right to apply those subsidies to the plan of their choosing with the exact magnitude depending on the demand specification as well as the definition of the expanded choice set an individual health plan exchange which employees would benefit and why

chasing a dream the use of tax abatements to spur urban economic development in this paper i develop a systematic framework for assessing the effectiveness of granting tax abatements to encourage urban economic development this approach focuses upon the abatement s effect upon the firm s decision to invest and the impact of the investment upon the community current policy fails to take these considerations into account adequately i use this framework to evaluate the potential revenue gain to the city of detroit of offering variable abatement awards and suggest a set of proposals to improve program performance

competition leverage how the demand side affects optimal risk adjustment we study optimal risk adjustment in imperfectly competitive health insurance markets when high risk consumers are less likely to switch insurer than low risk consumers insurers then have an incentive to select even if risk adjustment perfectly corrects for cost differences to achieve first best risk adjustment should overcompensate insurers for serving high risk agents second we identify a trade off between efficiency and consumer welfare reducing the difference in risk adjustment subsidies increases consumer welfare by leveraging competition from the elastic low risk market to the less elastic high risk market third mandatory pooling can increase consumer surplus further at the cost of efficiency

estimating price elasticities of convalescent care programmes this study is the first to estimate price elasticities of demand for convalescent care programmes in 1997 the german legislature more than doubled the daily co payments for the publicly insured from 6t o 13 the measure caused the overall demand for convalescent care treatments to fall by 20 to 25 i estimate the price elasticity for medical rehabilitation programmes aimed at preventing work disability to be about 0 3 whereas the elasticity for medical rehabilitation programmes for recovery from accidents at work lies around 0 5 the demand for preventive treatment at health spas is elastic and less than 1 how does the demand for medical care change when prices change since the early days of the profession of health economics the question of the price elasticity for health services has been central joseph p newhouse one of the founders of the field of health economics has published more than 100 articles alone on health care demand newhouse was also the leader of the rand group that designed and directed the famous rand health insurance experiment that focused on the impact of costsharing on the demand for medical care not only newhouse but also many other economists have devoted a great deal of attention to this topic

tax increment financing a theoretical inquiry abstract this paper offers an analysis of tax increment financing tif adding to a small theoretical literature on this important fiscal instrument the analysis exploits the theoretical connection between property values and public good levels which is the subject of a large literature in local public finance using this approach the paper shows that localized public improvements are likely to be opposed by property owners outside the affected area who pay higher property taxes with no offsetting benefits by using tax revenue captured from overlapping jurisdictions tif may circumvent this opposition allowing the city to implement the public improvement without an increase in its tax rate tif is not always viable as a financing method however because it may not generate enough additional revenue the analysis shows that tif s viability is ensured only when the public good is at least moderately underprovided relative to the socially optimal level in the case where the public good is slightly underprovided a public improvement is desirable but tif is not viable finally the analysis shows that the public good level ultimately chosen under tif need not be efficient with both under and overprovision being possible outcomes thus while tif may allow a city to carry out needed public improvements the stimulus it provides may be excessive

the welfare effects of restricted hospital choice in the us medical care market summary managed care health insurers in the usa restrict their enrollees choice of hospitals to within specific networks this paper considers the implications of these restrictions a three step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer the results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans a welfare analysis assuming fixed prices implies that restricting consumers choice of hospitals leads to a loss to society of approximately 1 billion per year across the 43 us markets considered this figure may be outweighed by the price reductions generated by the restriction copyright 2006 john wiley sons ltd

does price framing affect the consumer price sensitivity of health plan choice this paper provides field evidence on how price framing affects consumers decision to switch health plans in 2009 german federal regulation required insurers to express premium differences between standardized health plans in absolute euro values relative to a federal reference price rather than in percentage point payroll tax differences representative individual level panel data and aggregated health plan level panel data on the universe of health plans show that the reform strongly increased enrollees willingness to switch plans with demand elasticities increasing fourfold the salience of premium differences and the default premium are obviously key driving forces in the decision to switch insurers

can local incentives alter a metropolitan city s economic development cities in the us and europe have chosen increasingly to offer incentives designed to attract and retain local economic development the increased use of local incentives has occurred with little or

the value of consumer choice and the decline in hmo enrollments i introduction and overview health insurance contracts may restrict consumers choice of medical provider in order to minimize moral hazard for example consumers who are insured for their marginal healthcare expenses have no incentive to enforce price discipline on their own in this case insurers may impose this discipline by restricting consumers choice of medical provider to those who offer competitive prices 1 this practice known as selective contracting sc may have other benefits as well including channeling consumers to efficient providers and achieving other efficiencies associated with partial vertical integration sc has been utilized by insurers both in the united states and abroad 2 however it is not a universal feature of health insurance contracts in part this is because reducing the choice set of medical providers imposes costs on consumers to the extent that consumers assign option value to choice capps dranove and satterthwaite 2003 for example sc was widely employed in the united states by health maintenance organizations hmos and other insurers in the 1990s and appears to have been an important cost control mechanism cutler mcclellan and newhouse 2000 robinson and phibbs 1989 however most private u s health insurers moderated their use of sc during the past decade at the same time that healthcare costs accelerated anecdotally a consumer and regulatory backlash against provider choice restrictions forced insurers to expand choice and largely abandon the practice blendon et al 1998 vita 2001 simultaneously hmo enrollments declined the purpose of this article is to explore the economic tradeoffs of sc with a particular focus on directly measuring the value that consumers assign to choice in medical markets i am interested in assessing whether the magnitude of any utility loss from choice restrictions can be offset by volume based price discounts that insurers may receive from hospitals my results bear on the larger question of whether an economic linkage can be drawn between consumers demand for choice and their apparent rejection of what is called tightly managed care they also have implications for many healthcare reform proposals that necessarily imply restrictions on the consumers choice sets i analyze health plan s sc of hospitals in the state of florida between 1999 and 2003 hospital sc restricts consumer choice in multiple ways including their choice of hospital in addition hospital choice restrictions imply restrictions over the use of specific physicians 3 i start by constructing hospital networks for each of a set of plan choices and then estimate a discrete choice model of health insurance demand conditional on each plan s restricted network for these purposes i use the capps dranove and satterthwaite 2003 measure of sc disutility that focuses on the option value of choice i employ several different discrete choice estimators to estimate the model including models with plan metropolitan statistical area msa fixed effects designed to control for unobserved plan attributes this provides me with estimates of disutility resulting from choice restrictions subsequently i project the estimated plan effects onto an instrumented value of plan price in order to estimate the price elasticity and also convert my disutility estimates into dollars my results show that consumers associated restrictive hospital networks with plan disutility during each of the years of the study period with choice elasticities that range from 0 10 to 0 32 in pooled estimates greater effects are obtained in 2003 using models where i allow the estimates to vary by year using my instrumental variables methodology to recover unbiased price coefficients i show that consumers associated a one standard deviation reduction in the size of a plan s hospital network with a reduction in plan value of between 62 and 118

estimating housing consumption adjustments from panel data abstract although time series analysis of panel data has generally not been used in the study of housing demand longitudinal analysis provides the opportunity to increase our understanding of housing adjustments over time in particular time series analysis of housing choice using panel data permits appropriate use of both time series and cross sectional variation in housing prices provides the opportunity to separate age and cohort effects and facilitates integration of mobility analysis with housing choice analysis in this paper a longitudinal discrete choice model of the choice of housing tenure and size is presented and estimated using panel data this conditional fixed effects multinomial logit model developed by g chamberlain is computationally convenient and successfully accounts for time invariant differences among households while household specific unobserved characteristics can be readily accounted for in a linear model this is not the case for a quantitative choice model the use of a model of the type employed here thus provides a crucial link between time series analysis and a discrete choice setting estimation of this model yields results with respect to age and price that differ from results obtained from individual and pooled cross sections this provides support for the plausible proposition that housing choices are intertemporally correlated and more importantly emphasizes the importance of accounting for this correlation to estimate consistently the parameters of housing choice models

the welfare impact of hmo mergers abstract this paper estimates the welfare consequences of hmo mergers using data from california s small group market the analysis estimates the parameters from a differentiated products demand system the parameters are then used to simulate the effects of several hmo mergers by solving for the nash equilibrium in prices under different ownership structures even small mergers in moderately concentrated markets can result in significant consumer surplus reductions however these welfare losses can be offset by large efficiency gains the welfare consequences of hmo mergers turn less upon demand side considerations than on the health plan s ability to realize efficiencies

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

property tax abatement and the simultaneous determination of local fiscal variables in a metropolitan area a model is given for the behavior of communities and firms in regards to the granting of local firm property tax abatements in a metropolitan area the model yields a system of simultaneous equations that are estimated using a 1977 87 panel data set from the detroit metropolitan area results indicate that firm property tax abatements are offered by a community to offset noncapitalized profit reducing characteristics property tax abatements are effective at increasing nonresidential property bases but at costs decreased home values increased local property tax rates and increased state subsidies to local governments that should not be ignored by policy makers

price and the health plan choices of retirees abstract this study analyzes health plan choices of retirees in an employer sponsored health benefits program that resembles premium support models proposed for medicare in this program out of pocket premiums depend on when an individual retired and his or her years of service as of that date since this price variation is exogenous to unobserved plan attributes and retiree characteristics it is possible to obtain unbiased premium elasticity estimates the results indicate a significantly negative effect of premiums the implied elasticities are at the low end of the range found in previous studies on active employees

the elasticity of demand for health maintenance organizations this paper analyzes a national sample of firms where employees faced a choice between a health maintenance organization hmo and a conventional insurer such as blue cross a regression analysis is specified as a partial adjustment model and a logit functional form the long run price elasticity of demand for hmos is estimated to be 0 6 to the extent that employers pass on increases in the total premium the price elasticities facing insurers are higher furthermore the demand for hmos is a negative function of the copayment charged by the hmo for an office visit

premium levels and demand response in health insurance relative thinking and zero price effects abstract in health care systems with a competitive health insurance market governments or other sponsors e g employers often subsidize premiums to encourage enrolment these subsidies are typically independent of plan choice leaving the absolute premium differences in place so as not to distort consumer choice of plan such subsidies do however change the relative premium differences across plans which according to theories from behavioral economics can affect choice consumers might be sensitive to differences relative to a reference premium relative thinking furthermore consumers might be particularly sensitive to a reference premium of zero zero price effect a relevant range for some subsidized health insurance markets this paper tests these ideas with two sources of evidence we argue that observed equilibria in germany and the u s medicare advantage markets are consistent with a powerful zero price effect resulting in an equilibrium focal pricing at zero this contrasts with the netherlands where equilibrium premiums are well above zero in an empirical test using hypothetical questions in a web based survey in these three countries we also find evidence for both a relative thinking and a zero price effect in the demand for health insurance our findings imply that well designed subsidies can leverage relative thinking to increase demand elasticity for health plans creation of a powerful reference price e g at zero however risks subverting price competition

a three input model of the spatial effects of a central city wage tax abstract this paper considers the short run and long run spatial effects on wages employment and business capital as functions of location of a localized increase in wage tax rates the model is most applicable to a central city that has a higher wage tax rate than the surrounding suburbs the inclusion of land as a third input in production significantly reduces the long run effects of a central city wage tax on employment near the central city boundary as compared with a model in which labor and capital are the only two inputs the short run effects are significantly less than the long run effects