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The Effects of Drug Subsidies on Out-of Pocket Prescription Drug Expenditures by Seniors: Regional Evidence from Canada

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Author Info

  • Thomas F. Crossley
  • Paul Grootendorst
  • Sule Korkmaz
  • Michael R. Veall

Abstract

Between 1970 and 1986 all Canadian provinces introduced some version of a prescription drug subsidy for those age 65 or over and since 1986, all the provinces have increased copayments or deductibles to some degree. Employing a first-order approximation to the welfare gains from a subsidy, we find evidence that these subsidies have been less redistributive than an absolute per household cash transfer but slightly more redistributive than a transfer that would increase each household's income by the same percentage. Such evidence may have relevance for predicting the redistributive effects of a potential national prescription drug plan for seniors in the United States.

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Bibliographic Info

Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 19.

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Length: 33 pages
Date of creation: Apr 2000
Date of revision:
Handle: RePEc:mcm:sedapp:19

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Keywords: prescription drug subsidies; incidence; redistribution; progressivity;

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References

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  1. Jonathan Gruber & Maria Hanratty, 1993. "The Labor Market Effects of Introducing National Health Insurance: Evidence from Canada," NBER Working Papers 4589, National Bureau of Economic Research, Inc.
  2. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
  3. Paul V. Grootendorst, 1997. "Health care policy evaluation using longitudinal insurance claims data: An application of the Panel Tobit estimator," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 365-382.
  4. Blundell, Richard, 1988. "Consumer Behaviour: Theory and Empirical Evidence--a Survey," Economic Journal, Royal Economic Society, vol. 98(389), pages 16-65, March.
  5. P Grootendorst & B O'Brien & G Anderson, 1995. "On Becoming 65 in Ontario: Effects of Provincial Drug Plan Eligibility on Utilization of Prescription Medicines," Centre for Health Economics and Policy Analysis Working Paper Series 1995-01, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  6. Leibowitz, Arleen & Manning, Willard G. & Newhouse, Joseph P., 1985. "The demand for prescription drugs as a function of cost-sharing," Social Science & Medicine, Elsevier, vol. 21(10), pages 1063-1069, January.
  7. P Grootendorst, 1999. "Beneficiary Cost Sharing Under Canadian Provincial Prescription Drug Benefit Programs: History and Assessment," Centre for Health Economics and Policy Analysis Working Paper Series 1999-10, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  8. James Banks & Richard Blundell & Arthur Lewbel, 1994. "Tax reform and welfare measurement: do we need demand system estimation?," IFS Working Papers W94/11, Institute for Fiscal Studies.
  9. Richard Blundell & Alan Duncan, 1998. "Kernel Regression in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 62-87.
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Cited by:
  1. Crown William H. & Berndt Ernst R. & Baser Onur & Finkelstein Stan N. & Witt Whitney P. & Maguire Jonathan & Haver Kenan E., 2004. "Benefit Plan Design and Prescription Drug Utilization Among Asthmatics: Do Patient Copayments Matter?," Forum for Health Economics & Policy, De Gruyter, vol. 7(1), pages 1-35, January.
  2. Hirschberg, J.G. & Lye, J.N. & Slottje, D.J., 2008. "Inferential methods for elasticity estimates," Journal of Econometrics, Elsevier, vol. 147(2), pages 299-315, December.
  3. Thomas F. Crossley & Paul V. Grootendorst & Michael R. Veall, 2003. "National Catastrophic Drug Insurance Revisited: Who Would Benefit from Senator Kirby's Recommendations?," Social and Economic Dimensions of an Aging Population Research Papers 105, McMaster University.
  4. Hai Zhong, 2007. "Equity in Pharmaceutical Utilization in Ontario: A Cross Section and Over Time Analysis," University of Western Ontario, Economic Policy Research Institute Working Papers 20071, University of Western Ontario, Economic Policy Research Institute.
  5. Magnezi, Racheli & Weiss, Yossi & Cohen, Yossi & Shmueli, Amir, 2007. "Development of a capitation scale for IDF career soldiers in Israel," Health Policy, Elsevier, vol. 80(3), pages 459-464, March.
  6. Vincenzo Atella & Franco Peracchi & Domenico Depalo & Claudio Rossetti, 2006. "Drug compliance, co-payment and health outcomes: evidence from a panel of Italian patients," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 875-892.
  7. J. G. Hirschberg, J. N. Lye & D. J. Slottje, 2008. "Confidence Intervals for Estimates of Elasticities," Department of Economics - Working Papers Series 1053, The University of Melbourne.
  8. Burcay Erus & Nazli Aktakke, 2012. "Impact of healthcare reforms on out-of-pocket health expenditures in Turkey for public insurees," The European Journal of Health Economics, Springer, vol. 13(3), pages 337-346, June.

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