Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts

41 Pages Posted: 16 Feb 2005 Last revised: 30 Sep 2022

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Date Written: January 2005

Abstract

We use exogenous variation in Social Security payments created by the Social Security benefits notch to estimate how retirees' use of prescription medications responds to changes in their incomes. In contrast to estimates obtained using ordinary least squares, instrumental variables estimates based on the notch suggest that lower-income retirees exhibit considerable income sensitivity in their use of prescription drugs. Our estimates are potentially useful for thinking about the health care usage implications of any changes in transfer payments to the elderly that may occur in the future, and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.

Suggested Citation

Moran, John R. and Simon, Kosali Ilayperuma, Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts (January 2005). NBER Working Paper No. w11068, Available at SSRN: https://ssrn.com/abstract=652986

John R. Moran

Penn State University ( email )

116 Henderson Bldg.
Penn State University
University Park, PA 16802
United States

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