The effects of drug subsidies on out-of-pocket prescription drug expenditures by seniors: regional evidence from Canada

Abstract

Between 1970 and 1986 all Canadian provinces introduced some version of a prescription drug subsidy for those age 65 or over and since 1986 all the provinces have increased co-payments or deductibles to some degree. Employing a first-order approximation to the welfare gains from a subsidy, we find evidence that these subsidies have been less redistributive than an absolute per household cash transfer but slightly more redistributive than a transfer that would increase each household’s income by the same percentage. Such evidence may have relevance for predicting the redistributive effects of a potential national prescription drug plan for seniors in the United States.