Does cost sharing really reduce inappropriate prescriptions among the elderly?

Abstract

Improving prescription drug quality is an essential health policy goal in modern health systems, though evidence on the available instruments to attain such a goal are scarce. Cost sharing has an arguable role in improving the likelihood of an individual obtaining an appropriate prescription. This paper empirically examines the effect of cost sharing for prescription drugs in some dimensions of medication-related quality, namely the probability of inappropriate prescription drug use. Using data from United States seniors from 1996 to 2005, we explore various specifications of the probability of obtaining an inappropriate prescription that corrects for sample selection, endogeneity, and unobserved heterogeneity. Our results suggest a small, but measurable, negative price elasticity for inappropriate drug use to average out-of-pocket drug costs. That is, we find that user fees reduce the use of inappropriate medications, however the elasticity of cost sharing is found to be lower than that of drugs in general. A relatively close to zero price elasticity suggests that expected prescription quality improvements from co-payments are small in the light of our evidence.