Prioritizing Benefit? How Low-Income Patients Respond to Prescription Cost Sharing

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. (JEL D24, I11, I18, I32, I38, L65)