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)
Engelhardt, Gary V., and Jonathan Gruber.
"Medicare Part D and the Financial Protection of the Elderly."
American Economic Journal: Economic Policy,
National Government Expenditures and Health
Health: Government Policy; Regulation; Public Health
Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination