Prescription Drug Insurance Plans: Potential Cost Reductions and the Pass-Through of Manufacturer Pharmaceutical Rebates to Premiums

This paper investigates a possible predictor of adverse selection problems in unsubsidized stand-alone prescription drug insurance: the persistence of an individuals high spending over multiple years. Using Medstat claims data and data from the Medicare Survey of Current Beneficiaries, we find that persistence is much higher for outpatient drug expenses than for other categories of medical expenses. We then use these estimates to develop a simple and intuitive model of adverse selection in competitive insurance markets and show that this high relative persistence makes it unlikely that unsubsidized drug insurance can be offered for sale, even with premiums partially risk adjusted, without a probable adverse selection death spiral. We show that this outcome can be avoided if drug coverage is bundled with other coverage, and we briefly discuss the need either for comprehensive coverage or generous subsidies if adverse selection is to be avoided in private and Medicare insurance markets.

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Effects of Prescription Drug Insurance on Hospitalization and Mortality: Evidence from Medicare Part D

Journal of Risk & Insurance ◽

10.1111/jori.12229 ◽

2017 ◽

Vol 86 (3) ◽

pp. 595-628 ◽

Cited By ~ 5

Author(s):

Robert Kaestner ◽

Cuping Schiman ◽

G. Caleb Alexander

Keyword(s):

Prescription Drug ◽

Medicare Part D ◽

Medicare Part ◽

Part D ◽

Drug Insurance ◽

Prescription Drug Insurance

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Retirement Lock and Prescription Drug Insurance: Evidence from Medicare Part D

American Economic Journal Economic Policy ◽

10.1257/pol.20160560 ◽

2020 ◽

Vol 12 (1) ◽

pp. 389-417

Author(s):

Gal Wettstein

Keyword(s):

Prescription Drug ◽

Medicare Part D ◽

Medicare Part ◽

Full Time ◽

Part D ◽

Drug Insurance ◽

Before And After ◽

Time Work ◽

Part Time ◽

Prescription Drug Insurance

I examine whether lack of an individual market for prescription drug insurance causes individuals to delay retirement. Exploiting the 2006 introduction of Medicare Part D, which subsidized drug insurance for Americans over age 65, I use a triple-differences design that compares labor outcomes of individuals with retiree health insurance up to age 65 to those with insurance for life, before and after age 65, before and after 2006. I find that those with benefits only to age 65 decreased full-time work by 8.4 percentage points, of which 70 percent was due to transitions to part-time work. (JEL G22, H51, I13, I18, J14, J26)

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