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

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

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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File URL: http://www.nber.org/papers/w10964.pdf
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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
Note: AG HE
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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