Does Cost Sharing Affect the Quality of Pharmaceutical Care for the Elderly?

Gemmill-Toyama M and Joan Costa-Font

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: This paper examines whether cost sharing for prescription drugs improves medication-related quality measured by the probability of inappropriate prescription drug use among US seniors. Using data from 1996 to 2005, we explore various specifications that correct for sample selection, endogeneity¸ and unobserved heterogeneity. We find that user fees reduce the use of potentially inappropriate medications, implying that cost sharing has a positive effect on this aspect of quality. However, the price elasticity is relatively close to zero, suggesting that any quality improvements from co-payments are small. The income elasticity findings also indicate that medication-related quality is a normal good.

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