Research Highlights Featured Chart

November 12, 2026

The impact of prescription cost sharing

Low-income seniors respond to higher prescription costs by cutting back on expensive prescriptions, regardless of their medical importance.

Tyler Smith

Source: Daisy Daisy

Health insurers commonly require patients to pay part of the cost of their care. The rationale is that patients facing a price will forgo care of little value while keeping the care that matters most. 

In a paper in the American Economic Journal: Economic Policy, economist Christopher Hollrah examined how low-income patients responded when prescription costs rose sharply.

Hollrah studied Medicare's Low-Income Subsidy, which limits copays to a few dollars per fill. Seniors enrolled in both Medicare and Medicaid receive the subsidy automatically, and a timing rule determines how long the subsidy lasts if they lose Medicaid eligibility. Patients who lose Medicaid in July or earlier will lose the subsidy in the coming January, whereas those who lose Medicaid in August or later can keep it through the next calendar year. 

Comparing otherwise similar patients on either side of this cutoff, Hollrah found that losing the subsidy reduced prescription spending by 40 percent and the quantity of prescriptions filled by 16 percent.

Figure 6 shows which prescriptions patients gave up. It depicts estimates of the change in the amount of medication filled—measured in days’ supply—for each of the 200 most common prescriptions.

Figure 6 from Christopher Hollrah (2026)

Panel A groups these estimates into bins and plots them against the average out-of-pocket price per fill paid by Medicare beneficiaries without the subsidy. The points slope steadily downward, indicating that the costliest drugs see the sharpest drops. 

Panel B divides the same estimates into three categories defined by a physician panel: "high-benefit"—the absence of the drug increases the risk of an adverse health event within two months; "medium-benefit"—the absence of the drug increases the risk of an adverse health event with a year; and "lower-benefit"—drugs that improve quality of life, but are not needed to lower the impact of an adverse event. If patients prioritized medically important drugs, the line for high-benefit prescriptions would be flatter than the others. Instead, the three fitted lines nearly overlap, indicating that patients behave as though all prescriptions are of similar value.

The chart shows that low-income patients economize on higher-priced drugs, regardless of their benefits, with 60 percent of the spending reduction coming from high-benefit prescriptions, compared with 15 percent from lower-benefit ones. For example, insulin purchases, which cost about $70 per fill without the subsidy, fell by 35 percent. 

Overall, for low-income seniors, cost sharing appears to reduce prescription accessibility without improving cost-effectiveness.