IDEAS home Printed from
   My bibliography  Save this article

Medicare Part D and the Financial Protection of the Elderly


  • Gary V. Engelhardt
  • Jonathan Gruber


We examine the impact of the expansion of public prescription-drug insurance coverage from Medicare Part D and find evidence of substantial crowd-out. Using the 2002-2007 waves of the Medical Expenditure Panel Survey, we estimate the extension of Part D benefits resulted in 75 percent crowd-out of both prescription-drug insurance coverage and expenditures of those 65 and older. Part D is associated with sizeable reductions in out-of-pocket spending, much of which has accrued to a small proportion of the elderly. On average, we estimate a welfare gain from Part D comparable to the deadweight cost of program financing. (JEL H51, I18, J14)

Suggested Citation

  • Gary V. Engelhardt & Jonathan Gruber, 2011. "Medicare Part D and the Financial Protection of the Elderly," American Economic Journal: Economic Policy, American Economic Association, vol. 3(4), pages 77-102, November.
  • Handle: RePEc:aea:aejpol:v:3:y:2011:i:4:p:77-102 Note: DOI: 10.1257/pol.3.4.77

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    References listed on IDEAS

    1. Heiss, Florian & McFadden, Daniel L. & Winter, Joachim, 2006. "Who failed to enroll in Medicare Part D, and why? Early results," Munich Reprints in Economics 19427, University of Munich, Department of Economics.
    2. Jonathan D. Ketcham & Kosali Simon, 2008. "Medicare Part D's Effects on Elderly Drug Costs and Utilization," NBER Working Papers 14326, National Bureau of Economic Research, Inc.
    3. Feenberg, Daniel & Skinner, Jonathan, 1994. "The Risk and Duration of Catastrophic Health Care Expenditures," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 633-647, November.
    4. Gruber, Jonathan & Simon, Kosali, 2008. "Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?," Journal of Health Economics, Elsevier, vol. 27(2), pages 201-217, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Flores, Gabriela & O’Donnell, Owen, 2016. "Catastrophic medical expenditure risk," Journal of Health Economics, Elsevier, vol. 46(C), pages 1-15.
    2. repec:spr:soinre:v:132:y:2017:i:3:d:10.1007_s11205-016-1330-5 is not listed on IDEAS
    3. Kowalski, Amanda E., 2015. "Estimating the tradeoff between risk protection and moral hazard with a nonlinear budget set model of health insurance," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 122-135.
    4. Heiss, Florian & Leive, Adam & McFadden, Daniel & Winter, Joachim, 2013. "Plan selection in Medicare Part D: Evidence from administrative data," Journal of Health Economics, Elsevier, vol. 32(6), pages 1325-1344.
    5. Lakdawalla, Darius & Malani, Anup & Reif, Julian, 2017. "The insurance value of medical innovation," Journal of Public Economics, Elsevier, vol. 145(C), pages 94-102.
    6. Kristopher J. Hult & Tomas J. Philipson, 2012. "Public Liabilities and Health Care Policy," NBER Working Papers 18571, National Bureau of Economic Research, Inc.
    7. repec:kap:ijhcfe:v:17:y:2017:i:3:d:10.1007_s10754-017-9211-2 is not listed on IDEAS
    8. Francesco Decarolis & Maria Polyakova & Stephen P. Ryan, 2015. "The Welfare Effects of Supply-Side Regulations in Medicare Part D," NBER Working Papers 21298, National Bureau of Economic Research, Inc.
    9. repec:eee:jhecon:v:53:y:2017:i:c:p:17-37 is not listed on IDEAS
    10. repec:eee:socmed:v:193:y:2017:i:c:p:118-126 is not listed on IDEAS
    11. Amanda E. Kowalski, 2015. "What Do Longitudinal Data on Millions of Hospital Visits Tell Us about the Value of Public Health Insurance as a Safety Net for the Young and Privately Insured?," Cowles Foundation Discussion Papers 1983, Cowles Foundation for Research in Economics, Yale University.
    12. Robert Kaestner & Cuiping Long & G. Caleb Alexander, 2014. "Effects of Prescription Drug Insurance on Hospitalization and Mortality: Evidence from Medicare Part D," NBER Working Papers 19948, National Bureau of Economic Research, Inc.
    13. Padmaja Ayyagari, 2016. "Prescription drug coverage and chronic pain," International Journal of Health Economics and Management, Springer, vol. 16(2), pages 189-200, June.
    14. Limwattananon, Supon & Neelsen, Sven & O'Donnell, Owen & Prakongsai, Phusit & Tangcharoensathien, Viroj & van Doorslaer, Eddy & Vongmongkol, Vuthiphan, 2015. "Universal coverage with supply-side reform: The impact on medical expenditure risk and utilization in Thailand," Journal of Public Economics, Elsevier, vol. 121(C), pages 79-94.
    15. Ayyagari, Padmaja & Shane, Dan M., 2015. "Does prescription drug coverage improve mental health? Evidence from Medicare Part D," Journal of Health Economics, Elsevier, vol. 41(C), pages 46-58.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination


    This item is featured on the following reading lists or Wikipedia pages:
    1. Medicare Part D and the Financial Protection of the Elderly (AEJ:EP 2011) in ReplicationWiki


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:3:y:2011:i:4:p:77-102. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.