Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

This abstract-driven session contains three papers that examine different aspects of how Medicare Part D affects the prescription drug insurance market for elderly. Through this new government program, all Medicare beneficiaries have access to several dozens of choices of private sector plans through which they may obtain prescription drug coverage. Many fear that the large number of plans offered and the high costs of search may cause seniors to fail to match to their optimal plan (the one which minimizes their out of pocket expenditures). The first paper, by Jonathan Gruber, uses a database on over one million seniors to examine how consumers fared in decision making during the first year of the plan. By matching data on seniors drug utilization to the characteristics of the plan they chose relative to all the choices that were available to them, this paper can gauge the extent to which seniors matched to the plan that lowered their costs the most. This information is valuable because because of ongoing policy discussions to limit the number of choices available in the Part D marketplace.

The second paper, by Jonathan Ketcham and Kosali Simon, looks at what Part D has done to the quantity of drugs bought by seniors using pharmacy sales data from roughly 1/3rd of the nation's pharmacies. By examining data in 2005 vs 2006, this paper looks at whether the largest gains have occurred in traditionally underserved areas or in areas with better access to complementary healthcare, and what classes of drugs experienced the greatest gain in sales. Knowing how Medicare Part D affects geographical disparities in access to medications is an important aspect of evaluating the programs impact.

The third paper, by Darius Lakdhawalla and Neeraj Sood, examines the efficiency implications in the market for pharmaceuticals due to public drug coverage through Medicare Part D. It demonstrates how static and dynamic efficiency is enhanced when public insurance coverage is extended to a market with monopoly power. Thus, there are important welfare gains to consider on top of the risk reduction provided by public drug coverage. These are three well-matched papers that all work towards a better understanding of the impact of Medicare Part D on the prescription drug market for seniors.