Effects of cost-related medication nonadherence on financial health and retirement decisions among adults in late midlife Gail A. Jensen a and Yong Li b a Institute of Gerontology and Department of Economics, Wayne State University, Detroit, MI, USA and b Research and Analytics, Cigna, Raleigh, NC, USA Abstract Objectives Suboptimal adherence to prescribed medications due to cost is known to adversely affect physical health. In this study, we examine whether cost-related nonadher- ence (CRN) also affects ‘financial health’, e.g. an individual’s personal finances or the timing of their retirement. Methods We examine this issue for 2927 adults in late midlife with chronic medical conditions who participated in the Health and Retirement Study and who reported regularly taking medication(s) for their condition over the period 1994 to 2004. We hypothesize CRN may indirectly influence financial health by contributing to the occurrence of negative health shocks. We estimate two sets of models, one to quantify the effects of CRN on the occur- rence of adverse health events, and another to quantify the effects of adverse health events on personal finances in 2004 and the timing of retirement. We then derive estimates of the indirect effects of CRN on financial health and on retirement decisions. Key findings Among adults in late midlife, CRN contributes significantly to reduced earnings and premature retirements. These effects happen because CRN raises the risk that serious health shocks occur over time, and such adverse events subsequently limit an individual’s ability to continue working and accumulating wealth. Conclusions CRN can threaten more than just personal health. In late midlife, CRN can threaten an individual’s ability to continue working and saving towards retirement. Keywords cost-related nonadherence; long-run outcomes; medications; retirement; spillover effects Introduction For many adults in late midlife, chronic conditions, such as diabetes and hypertension, can be effectively managed with appropriate pharmacotherapy.Yet, about 20% of older patients sometimes take less medication than prescribed to avoid costs. [1] Negative health conse- quences of neglecting to follow prescribed regimens have been documented for patients with cardiovascular disease, diabetes and other conditions. Studies show that when these patients are followed over 2 to 4 years, their risk of serious and adverse health events increases, e.g. having a heart attack or stroke, [2,3] the symptoms and complications associated with their condition(s) tend to worsen [4,5] and they often require more health care. [6] Adverse health events or the onset of functional disabilities during late middle age may also have consequences for an individual’s ‘financial health’ because such declines may lead to decisions to reduce employment or retire sooner than planned, which in turn reduce household income and pension benefits as well. Increases in out-of-pocket healthcare spend- ing, which often accompany adverse health events, can also drain savings that were intended for use in retirement. It is easy to envision how either of these scenarios might substantially threaten the financial security of an individual or couple, right when they are trying to prepare for retirement and their senior years. This article examines whether cost-related nonadherence (CRN) indirectly influences an individual’s personal finances or the timing of retirement, operating through its negative effects on health and ability to function at work. We examine these issues for adults in late midlife with chronic conditions who regularly take medications, using retrospective data from the 1994–2004 Health and Retirement Study (HRS). This article enriches the existing literature on the effects of CRN by examining its negative spillover effects on a person’s ‘financial well-being’. Correspondence: Gail A. Jensen, Institute of Gerontology and Department of Economics, Wayne State University, 87 E. Ferry Street, Detroit, MI 48202, USA. E-mail: gail.jensen@wayne.edu Research Paper JPHSR 2014, ••: ••–•• © 2014 Royal Pharmaceutical Society Received May 28, 2014 Accepted October 7, 2014 DOI 10.1111/jphs.12076 ISSN 1759-8885 1