Prescription Drug Insurance Coverage, Drug Utilization, and Cost-Related Non-Adherence: Evidence from the Medicare Part D Expansion

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This paper uses the substantial increase in prescription drug insurance coverage from the adoption of Part D to generate new estimates the impact of coverage on drug utilization and cost-related non-adherence.  The analysis uses detailed panel data on the elderly before and after the implementation of Part D drawn from the 2005 and 2007 Prescription Drug Study (PDS), administered as a supplement to the Health and Retirement Study (HRS), a large nationally representative survey of Americans aged 50 and older.  Fixed-effect estimates suggest that gaining coverage results in a 15 percent increase in utilization.  These results are consistent with the lower end of estimates in the literature.  Gaining coverage also is associated with a 20-50 percent reduction in the incidence of cost-related non-adherence.  However, even among the uninsured, only a relatively small proportion of drugs (12 percent) are associated with episodes of cost-related non-adherence.  So, these large reductions apply to a small slice of all drugs.