The Effect of Prescription Drug Coverage on Mortality: Evidence from Medicaid Implementation

Abstract

This paper estimates the effect of Medicaid prescription drug spending on mortality. I use the group- and state-specific roll out of Medicaid drug coverage to isolate plausibly exogenous variation in drug expenditures. I find that a $1 increase in Medicaid drug expenditures per resident reduces mortality from internal causes by 2.0 deaths per hundred thousand, a decline of 0.23%. I find relatively large effects for: (1) medically-treated diseases which pose an immediate risk of death, (2) impoverished areas which received a disproportionate share of state Medicaid dollars, and (3) areas with a high ratio of medical to surgical physicians.