LDI Research Seminar: The Rothschild-Stiglitz Model After 25 Years by Roger Feldman

LDI Research Seminar Series
Roger Feldman, PhD
Director of Graduate Studies for HSR, Policy & Administration
Blue Cross Professor of Health Insurance, and Professor of Economics
University of Minnesota

"The Rothschild-Stiglitz Model After 25 Years"
Abstract Biosketch
Abstract:
RS is one of the most popular and influential models of health insurance markets. Assuming that consumers know more than insurers about the probability of illness, RS show that equilibrium in competitive insurance markets is inefficient, if it exists at all. Yet despite these strong predictions, there have been very few empirical tests of the RS model. It is not even clear if their assumption of imperfect information represents a reasonable starting point for theorizing about insurance.

What I plan to do is to explain the basic RS model and whatever empirical evidence I can find. Then I'm going to look at attempts to use RS as an "organizing device" to help think about trends in insurance markets such as the rise and recent decline of managed care. Efforts to apply the RS model in other markets will also be reviewed.

Hopefully, we can come to an assessment about the place of the RS model in economics after 25 years of use.

Biosketch:
Roger Feldman is the Blue Cross Professor of Health Insurance and Professor of Economics at the University of Minnesota. Dr. Feldman was a Marshall Scholar at the London School of Economics and holds a PhD in economics from the University of Rochester. His research interests include the organization, financing, and delivery of health care with a focus on employment-based health insurance. He also studies competition among health care providers and insurers. Currently, he is evaluating a program where large employers contract directly with providers to purchase health care services. Dr. Feldman's experience in health care policy includes serving on the Senior Staff of the President's Council of Economic Advisers, where he was the lead author of a chapter in the 1985 Economic Report of the President. From 1988 to 1992, he directed one of the four national research centers sponsored by the Health Care Financing Administration. He is currently advising HCFA on a demonstration of competitive pricing for Medicare M+C plans. Dr. Feldman is a regular contributor to journals in economics and health services research. His paper, The Effect of HMOs on Premiums in Employment-Based Health Plans was selected as the best paper of 1993 by the Association for Health Services Research. The Effect of Market Structure on HMO Premiums was selected for the 1995 Research Award by the National Institute of Health Care Management. Most recently, he edited a book on American Health Care: Government, Market Pocesses, and the Public Interest.