nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒04‒15
two papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. America’s Rejection of Compulsory Government Health Insurance in the Progressive Era and its Legacy for National Insurance Today By Herbert Emery
  2. The Effect of Medicare Part D on Pharmaceutical Prices and Utilization By Mark Duggan; Fiona Scott Morton

  1. By: Herbert Emery
    Abstract: Between 1915 and 1920, 18 U.S. states considered the introduction of compulsory health insurance. Given the alleged deficiencies of voluntary arrangements for insuring sickness, reformers expected social insurance to be welfare enhancing for American wage-workers since it would result in lower cost insurance and an extension of coverage to more of the population. Scholars commonly ascribe the inability of states to introduce government health insurance to American ideology and institutions that prevented the political mobilization of wage-workers. They view the lack of government insurance as a policy failure and significant for explaining why the U.S. does not have national health insurance today. The evidence presented in this paper casts doubt on this interpretation. Compulsory insurance would not have provided gains for wage-workers, and this explains the absence of broad political support for health insurance legislation in this early period.
    JEL: H51 H53 I11 I18 I38 N3 N4
    Date: 2008–01–01
  2. By: Mark Duggan; Fiona Scott Morton
    Abstract: On January 1, 2006, the federal government began providing insurance coverage for Medicare recipients' prescription drug expenditures through a new program known as Medicare Part D. Rather than setting pharmaceutical prices itself, the government contracted with private insurance plans to provide this coverage. Enrollment in Part D was voluntary, with each Medicare recipient allowed to choose from one of the private insurers with a contract to offer coverage in her geographic region. This paper evaluates the effect of this program on the price and utilization of pharmaceutical treatments. Theoretically, it is ambiguous whether the expansion in insurance coverage would increase or reduce pharmaceutical prices. Insurance-induced reductions in demand elasticities would predict an increase in pharmaceutical firms' optimal prices. However, Part D plans could potentially negotiate price discounts through their ability to influence the market share of specific treatments. Using data on product-specific prices and quantities sold in each year in the U.S., our findings indicate that Part D substantially lowered the average price and increased the total utilization of prescription drugs by Medicare recipients. Our results further suggest that the magnitude of these average effects varies across drugs as predicted by economic theory.
    JEL: H57 I11 I18 L11 L51
    Date: 2008–04

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