TY  - JOUR
AU  - Gaynor,Martin
AU  - Li,Jian
AU  - Vogt,William B.
TI  - Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12758
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12758
L1  - http://www.nber.org/papers/w12758.pdf
N1  - Author contact info:
Martin Gaynor
Heinz College
Carnegie Mellon University
4800 Forbes Avenue, Room 241
Pittsburgh, PA 15213-3890
Tel: 412/268-7933
Fax: 412/268-5338
E-Mail: mgaynor@cmu.edu

Jian Li
Carnegie Mellon University
Hamburg Hall 1113
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
Tel: 412/268-1415
E-Mail: jianl@andrew.cmu.edu

William B. Vogt
Senior Economist
RAND Corporation
4570 Fifth Ave
Pittsburgh, PA  15213
Tel: 412.683.2300 X4902
Fax: NA
E-Mail: william.b.vogt@gmail.com
AB  - 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.
ER  -