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Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics

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  • Zhou Yang
  • Donna B. Gilleskie
  • Edward C. Norton

Abstract

There is much debate about whether the Medicare Prescription Drug Bill -- the greatest expansion of Medicare benefits since its creation in 1965 -- will improve the health of elderly Americans, and how much it will cost. We model how insurance affects medical care utilization, and subsequently, health outcomes over time in a dynamic model with correlated errors. Longitudinal individual-level data from the 1992-1998 Medicare Current Beneficiary Survey provide estimates of these effects. Simulations over five years show that expanding prescription drug coverage would increase drug expenditures by between 12% and 17%. However, other health care expenditures would only increase slightly, and the mortality rate would improve.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10964.

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Date of creation: Dec 2004
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Publication status: published as Yang, Zhou, Donna Gilleskie, and Edward Norton. “Health Insurance, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics.” Journal of Human Resources 44, 1 (2009): 47-114.
Handle: RePEc:nbr:nberwo:10964

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Cited by:
  1. Florian Heiss & Daniel McFadden & Joachim Winter, 2007. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Working Papers 13627, National Bureau of Economic Research, Inc.
  2. Martin Gaynor & Jian Li & William B. Vogt, 2006. "Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits," NBER Working Papers 12758, National Bureau of Economic Research, Inc.

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