Medicare Part D and the Financial Protection of the Elderly
WP#2009-24
Abstract
We examine the impact of the expansion of public prescription prescription-drug insurance coverage from Medicare Part D has had on the elderly and find evidence of substantial crowd-out. Using detailed data from the 2002-6 waves of the Medical Expenditure Panel Survey (MEPS), we estimate that the extension of Part D benefits resulted in 75% crowd-out of prescription drug insurance coverage and 33%-50% crowd-out of prescription drug expenditures of those 65 and older. Part D is associated with relatively small 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.
For executive summary in PDF
For full paper in PDF
Gary V. Engelhardt is an associate professor of economics at Syracuse University and a senior research associate at the Center for Policy Research. Jonathan Gruber is a professor of economics at MIT. Jonathan Gruber is a professor of economics at MIT. The authors are grateful to John Graves for excellent research assistance. Gruber acknowledges financial support from the National Institute on Aging.