Free Prescription Drugs for Seniors Cut Catastrophic Spending by 62% in Poland

Before the reform, prescription medications represented the largest source of out-of-pocket health spending in Poland.

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A universal policy providing free prescription drugs to seniors in Poland significantly reduced out-of-pocket spending and sharply lowered the risk of catastrophic health expenditures, but it may also have prompted modest increases in spending on unhealthy goods, according to new research published in Health Economics.1

Prior research on the financial effects of public health coverage has largely centered on the US, where insurance markets are fragmented and cost-sharing structures are often complex and nonlinear. Experimental evidence from the Oregon Health Insurance Experiment showed that gaining Medicaid coverage significantly reduced out-of-pocket medical spending and financial strain.2 Additional studies have found that Medicaid eligibility lowers medical and insurance expenses and reduces poverty risk among vulnerable populations. Researchers have also examined Medicare Part D, which provides partial prescription drug subsidies for older adults through a nonlinear benefit design, further shaping out-of-pocket spending patterns among seniors.

The new study evaluates Poland’s “Drugs 75+” policy, introduced in September 2016, which eliminated out-of-pocket costs for a defined list of prescription medications for individuals aged 75 and older.1 Unlike broader insurance expansions, the reform targeted only prescription drugs, leaving all other aspects of health coverage unchanged. Using nationally representative household expenditure data from 2015 to 2018 and a sharp age-based eligibility cutoff at 75, researchers employed a difference-in-discontinuities design to isolate the causal effects of the policy.

Before the reform, prescription medications represented the largest source of out-of-pocket health spending in Poland. Households with members aged 75 and older spent an average of $35 per month on medications, with nearly 20% facing “catastrophic” drug expenditures, defined as spending more than 10% of disposable income on medications. On average, pharmaceutical spending accounted for about 8% of disposable income in this age group.

Following implementation of the policy, monthly out-of-pocket medication spending dropped by $8.36 at the eligibility threshold, a 23% reduction relative to baseline spending among 74-year-olds. The share of disposable income devoted to medications declined by 2 percentage points, from approximately 5.4% just below the cutoff, indicating that the policy meaningfully eased the financial burden of prescription drugs for seniors.

The most pronounced impact was on financial risk protection. The probability of catastrophic drug spending dropped by 9.8 percentage points at age 75, a 62% reduction relative to the prepolicy rate of 16%. The authors note that this compression of the spending distribution suggests the policy functioned as insurance against large health shocks, substantially reducing exposure to extreme out-of-pocket costs.

However, the reform did not significantly affect poverty rates. The estimated reduction in poverty, measured as disposable income net of medication spending falling below 60% of the national median, was 1.3 percentage points and not statistically significant. The authors attribute this to the distribution of benefits: higher-income and urban households, which had higher prepolicy drug spending and better access to care, realized larger absolute savings. As a result, financial gains were concentrated among households further from the poverty line, limiting measurable effects on poverty.

Heterogeneity analyses showed that households with high prepolicy drug spending, single-person households, and those composed entirely of older adults experienced the largest reductions in out-of-pocket costs. Still, the disproportionate benefits accruing to relatively better-off seniors raise concerns that the universal, non–means-tested design may have reinforced existing disparities, according to the authors.

Beyond direct financial effects, the study found suggestive evidence of behavioral responses consistent with ex ante moral hazard. Monthly spending on unhealthy goods, including alcohol, tobacco, and unhealthy foods, increased by approximately $7.50 among eligible households. These increases were concentrated among households that experienced the largest reductions in drug spending. The authors caution that this pattern may reflect reduced precautionary behavior due to improved financial protection, although a household-level income effect, particularly in multigenerational households, cannot be ruled out.

Overall, the findings suggest that fully subsidizing prescription drugs for seniors can substantially reduce financial risk, particularly catastrophic expenditures. At the same time, policymakers may need to consider potential behavioral responses and distributional effects when designing universal pharmaceutical benefit programs.

References

1. Majewska G, Zaremba K. The financial and behavioral effects of free prescription drugs: evidence from a policy discontinuity in Poland. Health Econ. 2026;00:1-35. doi:10.1002/hec.70083
2. 2. Finkelstein A, Taubman S, Wright B, et al; Oregon Health Study Group. The Oregon Health Insurance Experiment: evidence from the first year. Q J Econ. 2012;127(3):1057-1106. doi:10.1093/qje/qjs020