Free Medicines Thanks to Retirement: Moral Hazard and Hospitalization Offsets in an NHS

37 Pages Posted: 19 Aug 2011  

Jaume Puig-Junoy

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Pilar Garcia-Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

David Casado

Catalan Institute for the Evaluation of Public Policies (IVALUA)

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Date Written: July 1, 2011

Abstract

This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. To evaluate this coinsurance change we use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full population aged 58 to 65 in January 2004 covered by the public insurer in a Spanish region and we follow them until December 2006. We use a difference-in-differences strategy and exploit the eligibility age for Social Security to control for the endogeneity of the retirement decision. Our most conservative results show that the uniform exemption from pharmaceutical copayment granted to retired people in Spain increases the consumption of prescription medicines on average by 9.5%, total pharmaceutical expenditure by 15.2% and the costs borne by the insurer by 47.5%, without evidence of any offset effect in the form of reduced hospitalization. The impact is concentrated among individuals who were consumers of medicines for acute and other non-chronic diseases with a previous coinsurance rate in the range 30% to 40%.

Keywords: pharmaceuticals, cost sharing, hospitalization offsets, health care expenditure

JEL Classification: G22, I18, J14

Suggested Citation

Puig-Junoy, Jaume and Garcia-Gomez, Pilar and Casado, David, Free Medicines Thanks to Retirement: Moral Hazard and Hospitalization Offsets in an NHS (July 1, 2011). Netspar Discussion Paper No. 07/2011-055. Available at SSRN: https://ssrn.com/abstract=1912438 or http://dx.doi.org/10.2139/ssrn.1912438

Jaume Puig-Junoy

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Pilar Garcia Gomez (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

David Casado

Catalan Institute for the Evaluation of Public Policies (IVALUA) ( email )

Barcelona
Spain

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