Does Consolidation in Medicare Part D affect Enrollment and Drug Expenditures?

Pinka Chatterji, Chun-Yu Ho, Tao Jin and Yichuan Wang

No 32267, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper exploits the nationwide merger of CVS and Universal American to examine how industry consolidation in Medicare Part D affects beneficiaries’ enrollment in stand-alone prescription drug plans (PDPs) and out-of-pocket (OOP) drug spending. Data come from the 2010-2016 waves of the Health and Retirement Study (HRS). We find that overall, the merger decreases enrollment in stand-alone PDPs and increases OOP drug spending among enrollees who remain in PDPs. The merger’s negative effects on PDP enrollment are driven by healthier beneficiaries, while the increases in OOP drug spending are stronger for lower-income individuals and for individuals in worse health. The merger also leads to effects beyond drug usage and the PDP market; in particular, PDP enrollees use fewer outpatient visits and, overall, Medicare beneficiaries are less likely to enroll in Medicare Advantage prescription drug (MAPD) plans after the merger. Finally, we find some evidence that higher plan premiums and changes in plans’ quality and drug access after the merger are potential mechanisms leading to our main results.

JEL-codes: I1 I11 I13 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-com, nep-hea and nep-ind
Note: EH
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