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American Economic Journal: Economic Policy: Vol. 3 No. 4 (November 2011)

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Medicare Part D and the Financial Protection of the Elderly

Article Citation

Engelhardt, Gary V., and Jonathan Gruber. 2011. "Medicare Part D and the Financial Protection of the Elderly." American Economic Journal: Economic Policy, 3(4): 77-102.

DOI: 10.1257/pol.3.4.77

Abstract

We examine the impact of the expansion of public prescription-drug insurance coverage from Medicare Part D and find evidence of substantial crowd-out. Using the 2002-2007 waves of the Medical Expenditure Panel Survey, we estimate the extension of Part D benefits resulted in 75 percent crowd-out of both prescription-drug insurance coverage and expenditures of those 65 and older. Part D is associated with sizeable reductions in out-of-pocket spending, much of which has accrued to a small proportion of the elderly. On average, we estimate a welfare gain from Part D comparable to the deadweight cost of program financing. (JEL H51, I18, J14)

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Authors

Engelhardt, Gary V. (Syracuse U)
Gruber, Jonathan (MIT)

JEL Classifications

H51: National Government Expenditures and Health
I18: Health: Government Policy; Regulation; Public Health
J14: Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination

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