Volume 20, Issue 2

The Health and Retirement Study (HRS) is a preeminent data source for research related to the experiences of workers nearing retirement, including the large share of those workers who experience a health shock or disability onset after age 50. In this article, we highlight key information collected from HRS respondents that benefits disability policy research and the body of knowledge that has resulted from this information. Our main goal is to identify from this research experience potential improvements in data collection and documentation that would further strengthen the HRS as a data source for disability policy researchers.

We assess the quality of the HRS’s measures of out-of-pocket medical spending and health insurance premia, both in the “core interviews” and in the “exit interview” data. We provide detailed evidence on the quality of the HRS insurance premia data, and we compare the HRS exit data to exit data in the MCBS. We document how changes in survey questions, including the introduction of “unfolding brackets,” affect the HRS measures. We document what we believe are errors in the HRS imputations and provide some suggestions for improving the accuracy of some imputed variables. Overall, we find the HRS data to be of high quality. However, we believe that many interesting variables in the HRS are under-utilized because users must perform imputations themselves.

Specialty drugs can bring substantial benefits to patients with debilitating conditions, such as cancer, but their costs are very high. Insurers/payers have increased patient cost-sharing for specialty drugs to manage specialty drug spending. We utilized Medicare Part D plan formulary data to create the initial price (cost-sharing in the initial coverage phase in Part D), and estimated the total demand (both on- and off-label uses) for specialty cancer drugs among elderly Medicare Part D enrollees with no low-income subsidies (non-LIS) as a function of the initial price. We corrected for potential endogeneity associated with plan choice by instrumenting the initial price of specialty cancer drugs with the initial prices of specialty drugs in unrelated classes. We report three findings. First, we found that elderly non-LIS beneficiaries with cancer were less likely to use a Part D specialty cancer drug when the initial price was high: the overall price elasticity of specialty cancer drug spending ranged between −0.72 and −0.75. Second, the price effect in Part D specialty cancer drug use was not significant among newly diagnosed patients. Finally, we found that use of Part B-covered cancer drugs was not responsive to the Part D specialty cancer drug price. As the demand for costly specialty drugs grows, it will be important to identify clinical circumstances where specialty drugs can be valuable and ensure access to high-value treatments.

Price controls for prescription drugs are once again at the forefront of policy discussions in the United States. Much of the focus has been on the potential short-term savings – in terms of lower spending – although evidence suggests price controls can dampen innovation and adversely affect long-term population health. This paper applies the Health Economics Medical Innovation Simulation, a microsimulation of older Americans, to estimate the long-term impacts of government price setting in Medicare Part D, using pricing in the Federal Veterans Health Administration program as a proxy. We find that VA-style pricing policies would save between $0.1 trillion and $0.3 trillion (US$2015) in lifetime drug spending for people born in 1949–2005. However, such savings come with social costs. After accounting for innovation spillovers, we find that price setting in Part D reduces the number of new drug introductions by as much as 25% relative to the status quo. As a result, life expectancy for the cohort born in 1991–1995 is reduced by almost 2 years relative to the status quo. Overall, we find that price controls would reduce lifetime welfare by $5.7 to $13.3 trillion (US$2015) for the US population born in 1949–2005.