Should medicare adopt the veterans health administration formulary?

Austin B. Frakt, Steven D. Pizer, Roger D Feldman

Research output: Contribution to journalArticle

  • 11 Citations

Abstract

Since January 2006 all Medicare beneficiaries have been eligible to obtain outpatient prescription drug coverage through private stand-alone drug plans (PDPs). We estimate a model of beneficiary demand for PDPs and use it to compute the loss of consumer surplus due to tightening PDP formularies to the level found in the Veterans Health Administration (VA). Under a generous assumption of cost savings attributed to increased bargaining leverage associated with exclusion of more drugs from formularies, we find the loss in consumer surplus to be smaller than the financial savings that could be shared between Medicare and beneficiaries. According to our estimates, Medicare beneficiaries could be compensated for the loss in consumer surplus associated with tighter PDP formularies with the savings generated by such formularies.

LanguageEnglish (US)
Pages485-495
Number of pages11
JournalHealth Economics
Volume21
Issue number5
DOIs
StatePublished - May 1 2012

Fingerprint

Veterans Health
Formularies
United States Department of Veterans Affairs
Medicare
Pharmaceutical Preparations
Prescription Drugs
Cost Savings
Outpatients

Keywords

  • Demand elasticity
  • Formulary
  • Medicare
  • Prescription drugs
  • Welfare analysis

Cite this

Should medicare adopt the veterans health administration formulary? / Frakt, Austin B.; Pizer, Steven D.; Feldman, Roger D.

In: Health Economics, Vol. 21, No. 5, 01.05.2012, p. 485-495.

Research output: Contribution to journalArticle

Frakt, Austin B. ; Pizer, Steven D. ; Feldman, Roger D. / Should medicare adopt the veterans health administration formulary?. In: Health Economics. 2012 ; Vol. 21, No. 5. pp. 485-495.
@article{3de340c2345d499e9406d2464de8a01e,
title = "Should medicare adopt the veterans health administration formulary?",
abstract = "Since January 2006 all Medicare beneficiaries have been eligible to obtain outpatient prescription drug coverage through private stand-alone drug plans (PDPs). We estimate a model of beneficiary demand for PDPs and use it to compute the loss of consumer surplus due to tightening PDP formularies to the level found in the Veterans Health Administration (VA). Under a generous assumption of cost savings attributed to increased bargaining leverage associated with exclusion of more drugs from formularies, we find the loss in consumer surplus to be smaller than the financial savings that could be shared between Medicare and beneficiaries. According to our estimates, Medicare beneficiaries could be compensated for the loss in consumer surplus associated with tighter PDP formularies with the savings generated by such formularies.",
keywords = "Demand elasticity, Formulary, Medicare, Prescription drugs, Welfare analysis",
author = "Frakt, {Austin B.} and Pizer, {Steven D.} and Feldman, {Roger D}",
year = "2012",
month = "5",
day = "1",
doi = "10.1002/hec.1733",
language = "English (US)",
volume = "21",
pages = "485--495",
journal = "Health Economics (United Kingdom)",
issn = "1057-9230",
publisher = "John Wiley and Sons Ltd",
number = "5",

}

TY - JOUR

T1 - Should medicare adopt the veterans health administration formulary?

AU - Frakt, Austin B.

AU - Pizer, Steven D.

AU - Feldman, Roger D

PY - 2012/5/1

Y1 - 2012/5/1

N2 - Since January 2006 all Medicare beneficiaries have been eligible to obtain outpatient prescription drug coverage through private stand-alone drug plans (PDPs). We estimate a model of beneficiary demand for PDPs and use it to compute the loss of consumer surplus due to tightening PDP formularies to the level found in the Veterans Health Administration (VA). Under a generous assumption of cost savings attributed to increased bargaining leverage associated with exclusion of more drugs from formularies, we find the loss in consumer surplus to be smaller than the financial savings that could be shared between Medicare and beneficiaries. According to our estimates, Medicare beneficiaries could be compensated for the loss in consumer surplus associated with tighter PDP formularies with the savings generated by such formularies.

AB - Since January 2006 all Medicare beneficiaries have been eligible to obtain outpatient prescription drug coverage through private stand-alone drug plans (PDPs). We estimate a model of beneficiary demand for PDPs and use it to compute the loss of consumer surplus due to tightening PDP formularies to the level found in the Veterans Health Administration (VA). Under a generous assumption of cost savings attributed to increased bargaining leverage associated with exclusion of more drugs from formularies, we find the loss in consumer surplus to be smaller than the financial savings that could be shared between Medicare and beneficiaries. According to our estimates, Medicare beneficiaries could be compensated for the loss in consumer surplus associated with tighter PDP formularies with the savings generated by such formularies.

KW - Demand elasticity

KW - Formulary

KW - Medicare

KW - Prescription drugs

KW - Welfare analysis

UR - http://www.scopus.com/inward/record.url?scp=84859428565&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84859428565&partnerID=8YFLogxK

U2 - 10.1002/hec.1733

DO - 10.1002/hec.1733

M3 - Article

VL - 21

SP - 485

EP - 495

JO - Health Economics (United Kingdom)

T2 - Health Economics (United Kingdom)

JF - Health Economics (United Kingdom)

SN - 1057-9230

IS - 5

ER -