Selection and Public Insurance: Evidence from Medicare and the Medicaid Medically Needy Program

I examine the effects of public catastrophic insurance programs on enrollment and selection in private health insurance to supplement Medicare. Using variation over time in the availability and generosity of these programs I show that public catastrophic insurance crowds-in private insurance coverage for individuals in the middle of the health distribution, while reducing insur-ance for higher-risk individuals. The selective crowd-out of individuals in worse health induces advantageous selection in Medigap, one of two types of supplementary private insurance, and reduces Medigap insurance premiums by $225 per year