Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits
Recently, many US employers have adopted less generous prescription drug benefits. In addition, the U.S. began to offer prescription drug insurance to approximately 42 million Medicare beneficiaries in 2006. We use data on individual health insurance claims and benefit data from 1997-2003 to study the effects of changing consumers’ co-payments for prescription drugs on the quantity demanded and expenditure on prescription drugs, inpatient care and outpatient care. We allow for effects both in the year of the co-payment change and in the year following the change. Our results show that increases in prescription drug prices reduce both the use of and spending on prescription drugs. However, consumers substitute the use of outpatient care and inpatient care for prescription drug use, and the expenditure reductions on prescription drugs are largely offset by the increases in outpatient spending.
|Date of creation:||Nov 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 2 Priory Road, Bristol, BS8 1TX|
Phone: 0117 33 10799
Fax: 0117 33 10705
Web page: http://www.bris.ac.uk/cmpo/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kenneth Y. Chay & James L. Powell, 2001. "Semiparametric Censored Regression Models," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 29-42, Fall.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002.
"How Much Should We Trust Differences-in-Differences Estimates?,"
NBER Working Papers
8841, National Bureau of Economic Research, Inc.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
- Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, Junio.
- Frank R. Lichtenberg, 1996. "The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality," NBER Working Papers 5418, National Bureau of Economic Research, Inc.
- Matthew J. Eichner & Mark B. McClellan & David A. Wise, 1996.
"Insurance or Self-Insurance?: Variation, Persistence, and Individual Health Accounts,"
NBER Working Papers
5640, National Bureau of Economic Research, Inc.
- Matthew Eichner & Mark B. McClellan & David A. Wise, 1998. "Insurance or Self-Insurance? Variation, Persistence, and Individual Health Accounts," NBER Chapters, in: Inquiries in the Economics of Aging, pages 19-49 National Bureau of Economic Research, Inc.
- Wooldridge, Jeffrey M., 1999.
"Distribution-free estimation of some nonlinear panel data models,"
Journal of Econometrics,
Elsevier, vol. 90(1), pages 77-97, May.
- Wooldridge, J.M., 1990. "Distribution-Free Estimation Of Some Nonlinear Panel Data Models," Working papers 564, Massachusetts Institute of Technology (MIT), Department of Economics.
- Coulson, N. Edward & Stuart, Bruce, 1992. "Persistence in the use of pharmaceuticals by the elderly : Evidence from annual claims," Journal of Health Economics, Elsevier, vol. 11(3), pages 315-328, October.
- Pollak, Robert A & Wachter, Michael L, 1975. "The Relevance of the Household Production Function and Its Implications for the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 255-77, April.
- Davis, Karen & Russell, Louise B, 1972. "The Substitution of Hospital Outpatient Care for Inpatient Care," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 109-20, May.
- Powell, James L, 1986. "Symmetrically Trimmed Least Squares Estimation for Tobit Models," Econometrica, Econometric Society, vol. 54(6), pages 1435-60, November.
- Jay Helms & Jospeh P. Newhouse & Charles E. Phelps, 1978. "Copayments and Demand for Medical Care: The California Medicaid Experience," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 192-208, Spring.
- Newhouse, Joseph P. & Phelps, Charles E. & Marquis, M. Susan, 1980. "On having your cake and eating it too : Econometric problems in estimating the demand for health services," Journal of Econometrics, Elsevier, vol. 13(3), pages 365-390, August.
- A. Bhargava & L. Franzini & W. Narendranathan, 1982.
"Serial Correlation and the Fixed Effects Model,"
Review of Economic Studies,
Oxford University Press, vol. 49(4), pages 533-549.
- 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.
- Honore, Bo E. & Powell, James L., 1994. "Pairwise difference estimators of censored and truncated regression models," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 241-278.
- Mark V. Pauly & Yuhui Zeng, 2003. "Adverse Selection and the Challenges to Stand-Alone Prescription Drug Insurance," NBER Working Papers 9919, National Bureau of Economic Research, Inc.
- Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
- Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-65, May.
- Avi Dor & William Encinosa, 2004. "How Does Cost-Sharing Affect Drug Purchases? Insurance Regimes in the Private Market for Prescription Drugs," NBER Working Papers 10738, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bri:cmpowp:07/166. 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: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.