Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits / Martin Gaynor, Jian Li, William B. Vogt.

Format:

Book

Author/Creator:

Gaynor, Martin.

Contributor:

National Bureau of Economic Research.

Li, Jian.

Vogt, William B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12758.

NBER working paper series no. w12758

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

Recently, many U.S. employers have adopted less generous prescription drug benefits. In addition, the U.S. began to offer prescription drug insurance to approximately 42 million Medicare beneficiaries in 2006. We use data on individual health insurance claims and benefit data from 1997-2003 to study the effects of changing consumers' co-payments for prescription drugs on the quantity demanded and expenditure on prescription drugs, inpatient care and outpatient care. We allow for effects both in the year of the co-payment change and in the year following the change. Our results show that increases in prescription drug prices reduce both the use of and spending on prescription drugs. However, consumers substitute the use of outpatient care and inpatient care for prescription drug use, and about 35% of the expenditure reductions on prescription drugs are offset by the increases in other spending.

Notes:

Print version record

December 2006.