How Sensitive are Seniors to the Price of Prescription Drugs?
University of Pennsylvania Law School; Erasmus School of Law; PERC - Property and Environment Research Center
George Mason University - Buchanan Center Political Economy; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
FSU College of Law, Law and Economics Paper No. 05-17
FSU College of Law, Public Law Research Paper No. 161
This study estimates the demand curve for prescription drugs among elderly Medicare beneficiaries. In contrast to previous work, the current analysis uses a measure of price rather than insurance status as the key explanatory variable to test for seniors' sensitivity to prescription drug price changes. The estimates show that a one percentage point increase in the coinsurance rate implies a 1.01 percent decrease in the number of prescriptions filled and a 0.69 percent decrease in total drug expenditures. This finding indicates that seniors are far more responsive to prescription drug price changes than suggested by studies that examine younger individuals or those that do not control for self-selection into supplemental insurance plans.
Number of Pages in PDF File: 23
Keywords: Insurance, Moral Hazard, Medicare, Price Elasticity
JEL Classification: D8, H5, I1, I3, J1, K3working papers series
Date posted: July 23, 2005
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