The Medicare Modernization Act of 2003, better known as the legislation that added the Part D prescription drug benefit to the Medicare program, represents the single most significant expansion of public insurance programs in the U.S. in the past 40 years. Perhaps the most novel, and controversial, feature of this legislation was the use of multiple private insurance providers to deliver this new public insurance product, with widely varying prices and product features (including the donut hole whereby individuals are covered for initial drug expenditures but not for higher levels of expenditures). I will evaluate the effects of Part D using a unique data set that allows me to follow several million elders over the 2005 to 2009 period, with data on both their prescription drug coverage and their choice of Part D plan. In particular, this project aims to answer six questions. First, what is the financial risk facing elder when choosing their Part D plans; what are the financial consequences of alternative plan choices in their county? Second, are elders choosing the part D plan that minimizes their total cost of prescription drug coverage, and, if not, how much money are they leaving on the table through their choices? Third, what determines choice of Part D plan? I will estimate a comprehensive econometric model of plan choice to assess the role of financial and non-financial factors in driving choices. Fourth, what determines the dynamics of plan choice; do individuals re-optimize if they have chosen an inappropriate plan or is there very strong inertia in plan choice? Fifth, how does the structure of Part D plans affect utilization? These longitudinal data, and the potential econometric identification that is provided by inertia in plan choice, will allow me to develop estimates of utilization elasticity. Finally, how does prescription drug use respond to within-year changes in cost-sharing? Understanding whether individuals anticipate the donut hole, and how they react to this feature, is critical for modeling reforms to the Part D benefit structure. The result of these analyses will be the first comprehensive picture of how Part D choices are made, and how those choices impact beneficiary drug utilization. These findings should be very helpful to policy- makers as they consider ongoing reforms of this major entitlement program. ? ? The Medicare Modernization Act of 2003, better known as the legislation that added the Part D prescription drug benefit to the Medicare program, represents the single most significant expansion of public insurance programs in the U.S. in the past 40 years. Perhaps the most novel, and controversial, feature of this legislation was the use of multiple private insurance providers to deliver this new public insurance product, with widely varying prices and product features (including the donut hole whereby individuals are covered for initial drug expenditures but not for higher levels of expenditures). I will provide the first comprehensive picture of how Part D choices are made, and how those choices impact beneficiary drug utilization. These findings should be very helpful to policy-makers as they consider ongoing reforms of this major entitlement program. ? ? ? ?

Agency
National Institute of Health (NIH)
Institute
National Institute on Aging (NIA)
Type
Research Project (R01)
Project #
1R01AG031270-01
Application #
7354485
Study Section
Social Sciences and Population Studies Study Section (SSPS)
Program Officer
Baker, Colin S
Project Start
2008-03-15
Project End
2012-02-28
Budget Start
2008-03-15
Budget End
2009-02-28
Support Year
1
Fiscal Year
2008
Total Cost
$281,697
Indirect Cost
Name
National Bureau of Economic Research
Department
Type
DUNS #
054552435
City
Cambridge
State
MA
Country
United States
Zip Code
02138
Abaluck, Jason; Gruber, Jonathan; Swanson, Ashley (2018) Prescription Drug Use under Medicare Part D: A Linear Model of Nonlinear Budget Sets. J Public Econ 164:106-138
Abaluck, Jason; Gruber, Jonathan (2017) Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Reply. Am Econ Rev 106:3962-3987
Abaluck, Jason; Gruber, Jonathan (2016) Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Reply. Am Econ Rev 106:3962-87
Abaluck, Jason; Gruber, Jonathan (2016) Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance. Am Econ Rev 106:2145-2184
Abaluck, Jason; Gruber, Jonathan (2011) Heterogeneity in Choice Inconsistencies Among the Elderly: Evidence from Prescription Drug Plan Choice. Am Econ Rev 101:377-381
Abaluck, Jason; Gruber, Jonathan (2011) Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program. Am Econ Rev 101:1180-1210