Department of Economics

University of Delaware

Working Paper #2008-05

Income-related patient cost-sharing: Simulation for prescription drugs under Medicare

Kenneth A. Lewis and Laurence S. Seidman

ABSTRACT

This paper studies an application of income-related patient cost-sharing.  Using data from the Medicare Current Beneficiary Survey, we find that varying patient cost-sharing rates with patient income in the Medicare prescription drug program can reduce the severity of two problems: high percent-of-income burdens, and unequal medication due to income.  We estimate behavioral responses in the Medicare population and incorporate the estimates into a micro-simulation model which uses data that are representative of the actual Medicare population.  We find that introducing income-related patient cost-sharing into a Medicare drug program can dramatically reduce the severity of the two problems.

JEL Code: I18

Key Words: Patient Cost-Sharing, Medicare