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Does Cost Sharing really Reduce Inappropriate Prescriptions?

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  • Joan Costa-i-Font
  • Marin Gemmill-Toyama

Abstract

This paper explores different empirical strategies to examine the effect of cost sharing for prescription drugs in some dimensions of medication-related quality, namely the probability of inappropriate prescription drug use among United States seniors. Using data from 1996 to 2005, we explore various specifications that correct for sample selection, endogeneity¸ and unobserved heterogeneity. We find a small, but measurable, negative price elasticity for inappropriate drug use with respect to self-reported average out-of-pocket costs for all drugs consumed. That is, user fees reduce the use of potentially inappropriate medications, however the elasticity of cost sharing is lower than that of drugs in general and the price elasticity is relatively close to zero, suggesting that any quality improvements from co-payments are small.

Suggested Citation

  • Joan Costa-i-Font & Marin Gemmill-Toyama, 2010. "Does Cost Sharing really Reduce Inappropriate Prescriptions?," CESifo Working Paper Series 3002, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3002
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3002.pdf
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    References listed on IDEAS

    as
    1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    2. Kenkel, Donald S, 1991. "Health Behavior, Health Knowledge, and Schooling," Journal of Political Economy, University of Chicago Press, pages 287-305.
    3. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    4. Li, Xin & Guh, Daphne & Lacaille, Diane & Esdaile, John & Anis, Aslam H., 2007. "The impact of cost sharing of prescription drug expenditures on health care utilization by the elderly: Own- and cross-price elasticities," Health Policy, Elsevier, vol. 82(3), pages 340-347, August.
    5. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    6. repec:aph:ajpbhl:2001:91:11:1889-1894_4 is not listed on IDEAS
    7. Gabriel A. Picone & Frank A. Sloan & Shin-Yi Chou & Donald H. Taylor, 2003. "Does Higher Hospital Cost Imply Higher Quality of Care?," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 51-62, February.
    8. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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