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Do State Cost Control Policies Reduce Medicaid Prescription Drug Spending?

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  • Kosali Simon
  • Sharon Tennyson
  • Julie Hudman

Abstract

We present the first systematic analysis of state policies limiting prescription drug access under Medicaid during 1990–2004, documenting their impact on states’ Medicaid prescription spending growth. We see substantial variation in the number and type of policies used by states, but a clear upward trend in restrictions over time. Analysis of state level annual spending growth shows that these restrictions have in general helped contain Medicaid prescription drug costs and that some approaches, such as the use of preferred drug lists (PDLs) and tiered copayment systems, may have been more effective than others.

Suggested Citation

  • Kosali Simon & Sharon Tennyson & Julie Hudman, 2009. "Do State Cost Control Policies Reduce Medicaid Prescription Drug Spending?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(1), pages 39-66, March.
    • Handle: RePEc:bla:rmgtin:v:12:y:2009:i:1:p:39-66
    DOI: j.1540-6296.2009.01153.x
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    File URL: https://doi.org/10.1111/j.1540-6296.2009.01153.x
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    References listed on IDEAS

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    1. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1263-1296, December.
    2. Danzon, Patricia M & Harrington, Scott E, 2001. "Worker's Compensation Rate Regulation: How Price Controls Increase Costs," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 1-36, April.
    3. Dranove, David, 1989. "Medicaid Drug Formulary Restrictions," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 143-162, April.
    4. Katherine Baicker & Jeffrey R Brown & Douglas Holtz‐Eakin & Peter Orszag, 2008. "Future of Social Security, Medicare, and Medicaid: Is U.S. Entitlement Spending Sustainable?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 1-21, March.
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    Cited by:

    1. Andrew J. Epstein & Jonathan D. Ketcham, 2014. "Information technology and agency in physicians' prescribing decisions," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 422-448, June.
    2. Collins, J. Michael & Simon, Kosali I. & Tennyson, Sharon, 2013. "Drug withdrawals and the utilization of therapeutic substitutes: The case of Vioxx," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 148-168.
    3. Michael Geruso & Timothy Layton & Daniel Prinz, 2019. "Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 64-107, May.
    4. Michael Geruso & Timothy J. Layton, 2017. "Selection in Health Insurance Markets and Its Policy Remedies," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 23-50, Fall.
    5. Kristy Parkinson & Joseph Price & Kosali Simon & Sharon Tennyson, 2014. "The influence of FDA advisory information and black box warnings on individual use of prescription antidepressants," Review of Economics of the Household, Springer, vol. 12(4), pages 771-790, December.
    6. Ghosh, Ausmita & Simon, Kosali & Sommers, Benjamin D., 2019. "The Effect of Health Insurance on Prescription Drug Use Among Low-Income Adults:Evidence from Recent Medicaid Expansions," Journal of Health Economics, Elsevier, vol. 63(C), pages 64-80.

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