Partial Outsourcing of Public Programs: Evidence on Determinants of Choice in Medicare

Many public programs let individuals choose between publicly provided benefits and a subsidized private alternative. We investigate health insurance choice in Medicare—a setting with vast geographic variation in the uptake of the private alternative. We analyze insurance decisions among individuals who move to quantify the relative importance of individual-specific factors (e.g., preferences or income) and place-specific factors (e.g., local health insurance options). We find roughly 40% of the geographic variation in the share selecting private coverage is due to place-based factors, while the remainder due to individuals. Our findings inform the potential for place-based policy to address geographic disparities.