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Managed Care, Drug Benefits and Mortality: An Analysis of the Elderly

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  • Gautam Gowrisankaran
  • Robert J. Town
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    Abstract

    We seek to investigate whether managed health care can affect mortality, and if so, through which mechanisms. We estimate the impact of Medicare+Choice (M+C), Medicare's managed care program, on elderly mortality, using a county-level panel from 1993 to 2000. We control for endogenous M+C penetration rates with county fixed effects and instrumental variables. We construct instruments using the identification created by the fact that M+C payment rates are based on 3 to 8 year lagged fee-for-service (FFS) costs in the county. We find that enrollment in managed care without prescription drug coverage significantly increases mortality while enrollment in managed care with drug coverage has no significant impact, both relative to FFS. The impact of managed care penetration on mortality from heart disease appears to follow a similar pattern. The estimates suggest that a 10-percentage point increase in M+C non-drug coverage would cause 51,000 additional deaths among the aged population in 2000.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10204.

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    Date of creation: Jan 2004
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    Handle: RePEc:nbr:nberwo:10204

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    1. Victor R. Fuchs & Mark B. McClellan & Jonathan S. Skinner, 2004. "Area Differences in Utilization of Medical Care and Mortality among U.S. Elderly," NBER Chapters, National Bureau of Economic Research, Inc, in: Perspectives on the Economics of Aging, pages 367-414 National Bureau of Economic Research, Inc.
    2. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(1), pages 1-9, January.
    3. Town, Robert & Liu, Su, 2003. " The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 34(4), pages 719-36, Winter.
    4. Lee A. Lillard & Jeannette Rogowski & Raynard Kington, 1999. "Insurance Coverage for Prescription Drugs: Effects on Use and Expenditures in the Medicare Population," Working Papers, RAND Corporation Publications Department 99-09, RAND Corporation Publications Department.
    5. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, Econometric Society, vol. 41(4), pages 733-50, July.
    6. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 185, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Frank R. Lichtenberg, 2002. "The Effect of Changes in Drug Utilization on Labor Supply and Per Capita Output," NBER Working Papers, National Bureau of Economic Research, Inc 9139, National Bureau of Economic Research, Inc.
    8. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 251-77, June.
    9. Baker, Laurence C & Corts, Kenneth S, 1996. "HMO Penetration and the Cost of Health Care: Market Discipline or Market Segmentation?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 389-94, May.
    10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
    11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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    Cited by:
    1. Vincenzo Atella & Francesco D'Amico, 2010. "Who is responsible for your health: You, your doctor or new technologies?," CEIS Research Paper, Tor Vergata University, CEIS 167, Tor Vergata University, CEIS, revised 28 May 2010.
    2. Chernew, Michael & DeCicca, Philip & Town, Robert, 2008. "Managed care and medical expenditures of Medicare beneficiaries," Journal of Health Economics, Elsevier, Elsevier, vol. 27(6), pages 1451-1461, December.
    3. Blázquez-Fernández, Carla & González-Prieto, Noelia & Moreno-Mencía, Patricia, 2013. "Pharmaceutical Expenditure as a Determinant of Health Outcomes in EU Countries/El gasto farmacéutico como determinante de los resultados en salud en países de la UE," Estudios de Economía Aplicada, Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 31, pages 379-396, Septiembr.

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