Estimating the effects of prescription drug coverage for Medicare beneficiaries.
OBJECTIVE
To identify the effect of insurance coverage on prescription utilization by Medicare beneficiaries.


METHODS
Secondary data from the 1999 Medicare Current Beneficiary Survey (MCBS) Cost and Use files, a nationally representative survey of Medicare enrollees.


METHODS
The paper uses a cross-sectional design with (1) a standard regression framework to estimate the impact of prescription coverage on utilization controlling for potential selection bias with covariate control based on the Diagnostic Cost Group/Hierarchical Condition Category (DCG/HCC) risk adjuster, and (2) a multistage residual inclusion method using instrumental variables to control for selection bias and identify the insurance coverage effect.


METHODS
Data were extracted from the 1999 MCBS. Study inclusion criteria are community-dwelling MCBS respondents with full-year Medicare enrollment and supplemental medical insurance with or without full-year drug benefits. The final sample totaled 5,270 Medicare beneficiaries.


RESULTS
Both the model using the DCG/HCC risk adjuster and the model using the residual inclusion method produced similar results. The estimated price elasticity of demand for prescription drugs for the Medicare beneficiaries in our sample was -0.54.


CONCLUSIONS
Our results confirm that selection into prescription coverage is predictable based on observable health. Our results further confirm prior estimates of price sensitivity of prescription drug demand for Medicare beneficiaries, though our estimate is slightly above prior results.
Shea
Dennis G
DG
Department of Health Policy and Administration, The Pennsylvania State University, University Park, PA, USA.
Terza
Joseph V
JV
Stuart
Bruce C
BC
Briesacher
Becky
B
D014487:Centers for Medicare and Medicaid Services, U.S.; D003430:Cross-Sectional Studies; D005252:Fees, Pharmaceutical; D019538:Health Care Surveys; D006801:Humans; D019458:Insurance Coverage / Q000191:economics* / Q000706:statistics & numerical data; D015273:Insurance Selection Bias; D007356:Insurance, Pharmaceutical Services / Q000191:economics / Q000706:statistics & numerical data*; D006278:Medicare / Q000706:statistics & numerical data*; D017059:Models, Econometric; D015397:Program Evaluation; D012044:Regression Analysis; D020379:Risk Adjustment; D014481:United States