Wednesday, October 31, 2012

Competition in Health Care: Medicare Part D

As part of my ongoing project to chronicle the working of competition in health care, I note this latest article in the American Economic Review.

Medicare Part D is the prescription drug coverage program for senior citizens in the US.  Those eligible choose a plan from competing (yes, competing!) insurers.

Here is the abstract of the article and a paragraph from the conclusion.  I will emphasize this one sentence in particular:  "Our results add to the accumulating evidence that Part D represents a successful implementation of a market-based approach to deliver a large-scale entitlement program..."

Selection in GM's Pension Buyout?

General Motors has offered about 42,000 of its white collar employees a lump sum buyout from their pension plans.  The employees were offered either to keep the monthly pension payment they were entitled to or a lump sum, with the lump sum being set at an actuarially fair level:  present value of the stream of benefits, using a unisex life expectancy.  The latter is required by law.

Just this week, GM reported that about 1/3 of the eligible folks opted for the lump sum.  See this Chicago Tribune article for details.

Now, wouldn't it be neat to see the gender breakdown of those taking the lumpsum as compared to the gender mix in the eligible pool?  Since women live longer than men on average, and the lumpsum had to be set using average life expectancy across men and women, women should take the pension stream and men should take the lump sum (ceteris paribus, of course).