The relationship between health plan advertising and market incentives: Evidence of risk-selective behavior

Medicare beneficiaries are now facing advertising from an unprecedented number of health plans that are offering prescription drug coverage. Previous Medicare managed care efforts have been undermined by risk selection, the practice of enrolling healthier and therefore less costly patients. In this study we explore how the content of health plan advertising is related to the competitiveness of the health plan market. We find that increased competition is associated with greater use of advertising that targets healthier patients.