NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

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

NBER Working Paper No. 10964
Issued in December 2004
NBER Program(s):Aging, Health Economics

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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Document Object Identifier (DOI): 10.3386/w10964

Published: 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.

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