Prescription drugs, medical care, and health outcomes

Zhou, Yang

"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"--National Bureau of Economic Research web site.