The impact of Medicare Part D on prescription drug use by the elderly

Abstract

This study investigates the effect of Medicare Part D on the elderly's prescription drug use and out-of-pocket costs using a difference-in-differences research design. We estimate that Medicare Part D reduced user cost among the elderly by 18.4 percent, increased their use of prescription drugs by about 12.8 percent, and increased total U.S. usage by 4.5 percent in 2006. The estimated crowd-out rate was about 72 percent: Every seven prescriptions paid for by the government crowded out five other prescriptions and resulted in only two additional prescriptions used. This does not necessarily mean that Medicare Part D is an economically inefficient program.