Association for Public Policy Analysis & Management

Cost-sharing mechanisms such as copayments and deductibles can distort the healthcare consumption of consumers with no cash. We test for that possibility by studying the distribution of monthly Social Security checks among Medicare recipients. On the day that low-income Medicare recipients receive their Social Security checks, they become 4–8 percent percent more likely to fill a prescription. That effect is concentrated in low-income areas, and is of a similar magnitude for a variety of therapeutic classes, including essential drugs that treat cardiovascular, respiratory, and mental health conditions, as well as diabetes. We observe no effect among Medicare recipients who qualify for generous copay subsidies. High-frequency prescription-refill data allow us to directly observe Medicare Part D recipients whose prescriptions need to be refilled and yet who do not refill them until their checks arrive. The results suggest that up to 6 percent of low-income Medicare recipients time their healthcare consumption based on their Social Security checks.