Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance

We study choice over prescription insurance plans by the elderly using government administrative data to evaluate how these choices are made and evolve over time. We find that there is large "foregone savings" from not choosing the lowest cost plan that has grown over time. We develop a structural framework that allows us to exactly decompose the changes in "foregone welfare" from inconsistent choices into supply and demand side factors. We find that foregone welfare increases over time due primarily to supply-side factors such as premiums and out-of-pocket costs; we estimate little learning at either the individual or cohort level.