Essays on Social Insurance and Healthcare

Abstract

The first chapter studies menu design as a tool to improve the efficiency of selection markets. For some types of goods, individual preferences and costs are correlated, but prices cannot be used to screen consumers – creating selection inefficiencies in markets where these goods are sold. Using individual-level choice and claims data from the Massachusetts ACA exchange, I estimate that pairing generous coverage with narrow networks and less-generous coverage with broad networks yields between $190-$475 of additional surplus per enrolleeyear relative to offering choice along either plan dimension alone. While enrollee health is a key driver of both demand and cost, the efficient menu reduces the importance of health as a factor in plan selection. The second chapter studies the efficiency of automatic enrollment to improve the efficiency of insurance take-up. Studying removal of an auto-enrollment policy, we find that a small hassle – a requirement to actively select a health plan – reduces take-up by 33%, a major impact equivalent to $470 (57%) higher enrollee premiums. Hassles differentially screen out younger, healthier, and poorer people – groups with both low value and costs of insurance. This value-cost correlation – a standard feature of insurance, where risk drives both – may undermine the classic rationale for ordeals’ favorable targeting. The third chapter studies a formal notion of health equity. Focusing on a policy space that offers different health care subsidies for the rich and poor, we derive sufficient statistics for optimal policy. We calibrate the joint distribution of health, income and medical spending and revisit the RAND Health Insurance experiment to recover demand elasticities by income. We simulate the optimal joint health insurance policy and tax schedule using social welfare weights to capture welfare objectives over health and income.