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Accessible Unlicensed Requires Authentication Published by De Gruyter January 3, 2011

Managed Care, Drug Benefits and Mortality: An Analysis of the Elderly

Gautam Gowrisankaran, Robert Town and Eric Barrette


We evaluate the impact of the Medicare HMO program and prescription drug coverage on elderly mortality using data from 1993 to 2000. We specify a model of plan entry and benefit choice and Medicare enrollee plan choice and health outcomes. We derive an estimator that is consistent with endogenous plan selection by using the quasi-experimental variation caused by peculiarities of the Medicare reimbursement system for HMOs. We find that, relative to traditional Medicare, enrollment in an HMO without drug coverage increases mortality while enrollment in an HMO with drug coverage has no significant impact. The economic value of the reduction in mortality from drug coverage far outweighs the costs. HMOs, those without drug coverage in particular, attract healthier enrollees than average.

Published Online: 2011-1-3

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston