American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Prioritizing Benefit? How Low-Income Patients Respond to Prescription Cost Sharing
American Economic Journal: Economic Policy
(pp. 245–72)
Abstract
This paper measures how cost sharing impacts older low-income patients, exploiting a discontinuity in eligibility for a prescription drug subsidy for those who lose access to the Medicaid-linked program. Higher drug prices resulting from subsidy loss lead to a 40 percent reduction in prescription expenditures, driven by a 16 percent quantity reduction of prescriptions filled. Patients economize on purchases of higher-priced drugs, irrespective of their health benefits. For example, patients reduce insulin purchases by 35 percent. There is no evidence that cost sharing prompts switching from branded drugs to generics. This behavior suggests that cost sharing reduces prescription accessibility without enhancing cost-effectiveness.Citation
Hollrah, Christopher. 2026. "Prioritizing Benefit? How Low-Income Patients Respond to Prescription Cost Sharing." American Economic Journal: Economic Policy 18 (4): 245–72. DOI: 10.1257/pol.20240814Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- I11 Analysis of Health Care Markets
- I18 Health: Government Policy; Regulation; Public Health
- I32 Measurement and Analysis of Poverty
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology