48 Pages Posted: 12 Jul 2010 Last revised: 24 Aug 2010
Date Written: July 2010
We examine the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and find evidence of substantial crowd-out. Using detailed data from the 2002-7 waves of the Medical Expenditure Panel Survey (MEPS), we estimate that the extension of Part D benefits resulted in 80% crowd-out of both prescription drug insurance coverage and prescription drug expenditures of those 65 and older. Part D is associated with only modest 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.
Suggested Citation: Suggested Citation
Engelhardt, Gary V. and Gruber, Jonathan, Medicare Part D and the Financial Protection of the Elderly (July 2010). NBER Working Paper No. w16155. Available at SSRN: https://ssrn.com/abstract=1636134