Rationing Medicine Through Bureaucracy: Authorization Restrictions in Medicare / Zarek C. Brot-Goldberg, Samantha Burn, Timothy Layton, Boris Vabson.

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Brot-Goldberg, Zarek C

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30878.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: High administrative costs in U.S. health care have provoked concern among policymakers over potential waste, but many of these costs are generated by managed care policies that trade off bureaucratic costs against reductions in moral hazard. We study this trade-off for prior authorization restriction policies in Medicare Part D, where low-income beneficiaries are randomly assigned to default plans. Beneficiaries who face restrictions on a drug reduce their use of it by 26.8%. Approximately half of marginal beneficiaries are diverted to another related drug, while the other half are diverted to no drug. These policies generated net financial savings, reducing drug spending by $96 per beneficiary-year (3.6% of drug spending), while only generating approximately $10 in paperwork costs. Revealed preference approaches suggest that the cost savings likely exceed beneficiaries' willingness to pay for foregone drugs.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30878 (Browse shelf(Opens below))	Not For Loan

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January 2023.

High administrative costs in U.S. health care have provoked concern among policymakers over potential waste, but many of these costs are generated by managed care policies that trade off bureaucratic costs against reductions in moral hazard. We study this trade-off for prior authorization restriction policies in Medicare Part D, where low-income beneficiaries are randomly assigned to default plans. Beneficiaries who face restrictions on a drug reduce their use of it by 26.8%. Approximately half of marginal beneficiaries are diverted to another related drug, while the other half are diverted to no drug. These policies generated net financial savings, reducing drug spending by $96 per beneficiary-year (3.6% of drug spending), while only generating approximately $10 in paperwork costs. Revealed preference approaches suggest that the cost savings likely exceed beneficiaries' willingness to pay for foregone drugs.