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

Listed author(s):
  • Gowrisankaran Gautam

    ()

    (University of Arizona, HEC Montreal, and National Bureau of Economic Research)

  • Town Robert

    ()

    (University of Minnesota and National Bureau of Economic Research)

  • Barrette Eric

    ()

    (University of Minnesota)

We evaluate the impact of the Medicare HMO program and prescription drug coverage on elderly mortality using data from 1993 to 2000. We specify a model of plan entry and benefit choice and Medicare enrollee plan choice and health outcomes. We derive an estimator that is consistent with endogenous plan selection by using the quasi-experimental variation caused by peculiarities of the Medicare reimbursement system for HMOs. We find that, relative to traditional Medicare, enrollment in an HMO without drug coverage increases mortality while enrollment in an HMO with drug coverage has no significant impact. The economic value of the reduction in mortality from drug coverage far outweighs the costs. HMOs, those without drug coverage in particular, attract healthier enrollees than average.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 11 (2011)
Issue (Month): 2 (January)
Pages: 1-32

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Handle: RePEc:bpj:bejeap:v:11:y:2011:i:2:n:3
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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,in: Perspectives on the Economics of Aging, pages 367-414 National Bureau of Economic Research, Inc.
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  3. Lee A. Lillard & Jeannette Rogowski & Raynard Kington, 1999. "Insurance Coverage for Prescription Drugs: Effects on Use and Expenditures in the Medicare Population," Working Papers 99-09, RAND Corporation.
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
  5. repec:mpr:mprres:3849 is not listed on IDEAS
  6. David M. Cutler & Sarah J. Reber, 1998. "Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 433-466.
  7. Zhou Yang & Donna B. Gilleskie & Edward C. Norton, 2004. "Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics," NBER Working Papers 10964, National Bureau of Economic Research, Inc.
  8. Town, Robert & Liu, Su, 2003. " The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 719-736, Winter.
  9. 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, vol. 77(3), pages 251-277, June.
  10. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
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  12. 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, vol. 10(1), pages 1-9, January.
  13. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  14. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 26-29, January.
  15. Frank R. Lichtenberg, 2002. "The Effect of Changes in Drug Utilization on Labor Supply and Per Capita Output," NBER Working Papers 9139, National Bureau of Economic Research, Inc.
  16. 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, vol. 86(2), pages 389-394, May.
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