Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics

55 Pages Posted: 19 Dec 2004 Last revised: 18 Dec 2022

See all articles by Zhou Yang

Zhou Yang

University of Florida - Department of Health Services Research, Management, and Policy

Donna B. Gilleskie

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Edward C. Norton

University of Michigan at Ann Arbor

Date Written: December 2004

Abstract

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.

Suggested Citation

Yang, Zhou and Gilleskie, Donna B. and Norton, Edward C., Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics (December 2004). NBER Working Paper No. w10964, Available at SSRN: https://ssrn.com/abstract=633625

Zhou Yang

University of Florida - Department of Health Services Research, Management, and Policy ( email )

Gainesville, FL 32611-7140
United States

Donna B. Gilleskie (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Edward C. Norton

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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