Working Paper: NBER ID: w12758
Authors: Martin Gaynor; Jian Li; William B. Vogt
Abstract: Recently, many U.S. 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 about 35% of the expenditure reductions on prescription drugs are offset by the increases in other spending.
Keywords: prescription drugs; cost-sharing; healthcare spending; outpatient care; inpatient care
JEL Codes: D12; I10; M50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| out-of-pocket drug prices (P22) | prescription drug spending (H51) |
| out-of-pocket drug prices (P22) | outpatient spending (H51) |
| prescription drug spending (H51) | outpatient spending (H51) |
| out-of-pocket drug prices (P22) | inpatient spending (H51) |