Working Paper: NBER ID: w11068
Authors: John R. Moran; Kosali Ilayperuma Simon
Abstract: We use exogenous variation in Social Security payments created by the Social Security benefits notch to estimate how retirees' use of prescription medications responds to changes in their incomes. In contrast to estimates obtained using ordinary least squares, instrumental variables estimates based on the notch suggest that lower-income retirees exhibit considerable income sensitivity in their use of prescription drugs. Our estimates are potentially useful for thinking about the health care usage implications of any changes in transfer payments to the elderly that may occur in the future, and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.
Keywords: Prescription drugs; Elderly; Income sensitivity; Social security; Medicare
JEL Codes: I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Income (D31) | Prescription drug use (H51) |
| Social security benefits notch (H55) | Income (D31) |
| Social security income (H55) | Prescription drug use (H51) |