Working Paper: NBER ID: w16155
Authors: Gary V. Engelhardt; Jonathan Gruber
Abstract: We examine the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and find evidence of substantial crowd-out. Using detailed data from the 2002-7 waves of the Medical Expenditure Panel Survey (MEPS), we estimate that the extension of Part D benefits resulted in 80% crowd-out of both prescription drug insurance coverage and prescription drug expenditures of those 65 and older. Part D is associated with only modest reductions in out-of-pocket spending. This suggests that the welfare gain from protecting the elderly from out-of-pocket spending risk through Part D has been small.
Keywords: Medicare; Part D; Financial Protection; Elderly; Crowdout
JEL Codes: H51; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| public insurance coverage (I13) | crowdout of existing coverage (G52) |
| Medicare Part D (H51) | prescription drug coverage increase (H51) |
| Medicare Part D (H51) | increase in drug spending (H51) |
| Medicare Part D (H51) | increase in total public expenditure (H59) |
| Medicare Part D (H51) | modest decline in out-of-pocket drug spending (H51) |