Perverse Incentives in the Medicare Prescription Drug Benefit / David McAdams, Michael Schwarz.

Format:

Book

Author/Creator:

McAdams, David.

Contributor:

National Bureau of Economic Research.

Schwarz, Michael.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12008.

NBER working paper series no. w12008

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

We analyze some of the perverse incentives that may arise under the current Medicare prescription drug benefit design. In particular, risk adjustment for a stand-alone prescription drug benefit creates perverse incentives for prescription drug plans' coverage decisions and/or pharmaceutical companies' pricing decisions. This problem is new in that it does not arise with risk adjustment for other types of health care coverage. For this and other reasons, Medicare's drug benefit requires especially close regulatory oversight, now and in the future. We also consider a relatively minor change in how the benefit is financed that could lead to significant changes in how it functions. In particular, if all plans were required to charge the same premium, there would be less diversity in quality but also less budgetary uncertainty and less upward pressure on drug prices.

Notes:

Print version record

February 2006.